Ruthless_Mortgage_Price() function |

**Ruthless_Mortgage_Price()
function**

**Ruthless_Mortgage_Price(argument
list…)**

This older
function values a mortgage security using a Hull-White interest
rate tree and asssuming a ruthlessly-exercised (i.e. purely
rational and economic, like a callable amortizing bond)
prepayment model. **MBS_Tabular** uses a more
sophisticated approach. The function returns the price per $100
principal.

The function uses the following arguments:

Argument |
Description |
Restrictions |

WAC |
the
coupon rate on the mortgage security in decimal form,
e.g. 8% is expressed as 0.08 (for MBS, this is often
lower than the rate on the underlying mortgages) NB: this rate must be specified as an annual rate, with a semi-annual compounding frequency |
>= 0 |

Valuation_Date |
the valuation date for the security (e.g. today); NB: the first element of the zero curve date array must be equal to this value | valid Excel date number |

Maturity_Date |
maturity date of mortgage | valid
Excel date number >= Valuation_Date |

First_Open_Date |
first "open" date of the mortgage (before this date, full economic prepayment penalties apply, which are based on the entire interest rate differential); if the first open date is past the maturity date, the mortgage is "closed" | none |

Months_PIP |
the number of months worth of penalty interest for liquidations in the open period (e.g. 3 months is typical for Canada) | >= 0.0 |

RAM |
the remaining amortization of the mortgage, measured in MONTHS from the valuation date (e.g. 20 years remaining amortization would be entered as 240) | > 0 |

Partials_Percent_per_year |
is percentage partial prepayments allowed (penalty free) in decimal form, e.g. 15% is expressed as 0.15; NB: assumes that it is percent of REMAINING principal, not original, and also assumes that it is like a liquidation, i.e. no effect on amortization | >= 0.0 |

Swap_Dates |
array of zero coupon curve dates for the curve (curve should be of comparable credit risk as the mortgages) | strictly
ascending orderThe first date of this array must be Valuation_Date |

Swap_Rates |
array of continuously compounded zero coupon rates in decimal form (e.g. six percent entered as 0.06) for the curve | >
0 correspond to Swap_Rates array |

Reversion_Rate |
mean
reversion rate of the short rate of interest, in decimal
form (Hull-White model) When set to zero, the Hull-White model reduces to the Ho-Lee [1986] model. |
>= 0 |

Short_Rate_Vol |
annual standard deviation of the short rate of interest, in decimal form (Hull-White model) | > 0 |

OAS |
parallel shift of the zero curve in decimal form | none |

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