Computer simulation reveals hidden risks in housing mortgage loans.
The article explores how changes in market interest rates affect the risk of prepayment in housing mortgage loans. By using computer simulations and a specific mathematical model, the researchers calculated the impact of prepayment on the duration and convexity of these loans. They found that prepayment can significantly affect how banks manage their assets and liabilities. This study helps commercial banks better understand and manage the interest rate risk associated with housing mortgage loans.