英语论文网

gage metrics. Moody's update their model periodically with new parameters accordingly with changing economic conditions. So let us see what moody's mortgage metrics is and what updates they made till 2008.

According to (Moody`s Investors service, 2003), In the year 2003 moody's mortgage metrics published and it is as following.

In this model moody's incorporated up to date performance information which they got from loan performance Inc formerly known as mortgage Information Corporation. The loan performance information from loan performance Inc is used to calculate frequency of default, cause and effect relationship of macroeconomic variables and loan loss severity stress

Moody's believe that there is shift in origination practices which are using technology to access borrowers quality, loan risk and appraisal accuracy. So the whole process is streamlined with improved technology, tighter control of lending. However the strict the lending practices are there is huge impact on the loan performance beyond prediction to any statistical model.

There are many refinements to rating approach with stronger emphasis on evaluating the direct sensitivity of loan and pool performance to specific economic stress. Advanced time series analysis increases predictive power and enables meaningful conclusions from even moderately lived vintages.

The rating process starts with the review of an originators and servicers policies and practices. Next comes the analysis of the characteristics of loans in the pool. Then management will allocate corresponding rating accordingly depending up on credit support levels.

A new model has been developed and new parameters have been introduced as inputs. This model is called moody's mortgage metrics (MMM). Once pool is selected MMM run through each and every loan in the pool and simulates it over 1000 economies. MMM takes in to consideration interest rate and unemployment and real-estate movement to determine the probability of loan defaulting, prepaying in any quarter. Performance of the survivors is also simulated in future quarters. So loss analysis is time and history dependent.

Loan loss severity is the function of loan characteristics and local economy. And it is also known that market movement effects loan severity and the effect is complex.

The models result after simulation of loan performance is pool vector which is aggregate of individual loan results into pool losses for each economy. Now having pool loss distribution in hand moody's then analyzes the cash flow to the securitization structure and determines expected loss to any supported tranche

Moody's choose to analyze the likelihood of foreclosure status as a measure of default for loans. Analyzing only loans suffering a loss would have eliminated particularly for loans with deep mortgage insurance, which often generate no net loss to certificate holders even if the property is liquidated.

ne means of measuring the predictive power of the model is to graph power curve. Comparing the models prediction of default frequency to cumulative observations of default. 本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。