Analyzing securitization processes using simulation methods

The aim of this paper is to present an analysis of securitization processes using simulation and optimization methods. We discuss the main risk factors that may affect profitability of the process. These risk factors are interest rates and mortgage prepayments. We combine latest risk factor models to create a consistent framework to analyze and improve securitization processes. We then show that making ad hoc securitization decisions may be far less efficient than by solving optimization problems. (© 2008 WILEY-VCH Verlag GmbH & Co. KGaA, Weinheim)