A new multidimensional prepayment model introduced to the MBS market last week by Andrew Davidson & Co. may not only allow users to complement their existing prepayment model, but may also prove to be a valuable hedging tool.

The recently developed Implied Prepayment Model for Mortgage-Backed Securities computes the prepayment speeds implied by actual market valuations of TBAs and compares the results to the speeds forecasted by other models.

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