Abstract
Analysis of the most popular single-factor mortgage valuation models unambiguously rejects the lognormality of interest rates. Recent trends in the swaption market indicate normalization, supporting use of the Hull-White model, which can be quickly and accurately calibrated to at-the-money swaptions. Durations for TBA instruments come up shorter by the Hull-White model and are generally more in line with the empirical measures. The issue of negative rates is not found to be detrimental to the standard OAS pricing practice.
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