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IAQF & Thalesians Seminar Series: Joy Zhang - Agency MBS Prepayment Model using Neural Networks

  • 15 Jan 2019
  • 6:00 PM
  • Fordham Gabelli School of Business, McNally Amphitheatre 140 West 62nd Street New York, NY 10023

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Agency MBS Prepayment Model Using Neural Networks

                    
Joy Zhang

5:45 PM Registration

7:30 PM Reception

A Talk by  


Tuesday, January 15th

6:00 PM Seminar Begins

    
Abstract 
We apply deep neural networks, a type of machine learning method, to model agency MBS 30year fixed rate pool prepayment behaviors. The neural networks model (“NNM”) is able to produce highly accurate model fits to the historical prepayment patterns, as well as accurate sensitivities to risk factors. These results are comparable with model results and intuition obtained from a traditional agency pool level prepayment model built via many iterations of trial and error of many months and years. This example shows NNM can process large data sets efficiently, capture very complex prepayment patterns, and can model large group of risk factors that are highly non-linear, and interactive. We also examine various potential shortcomings of this approach, including non-transparency/”blackbox” issue, model overfitting, and regime shift issues.


 

Biography

Joy Zhang is an Executive Director and Head of Non-Agency Securitization Research at MSCI. Previously, Joy was a Director at Credit Suisse, responsible for mortgage collateral and regulatory modeling for securitized products trading. She also has worked as a senior developer at Goldman Sachs responsible for developing a firm-wide risk management system. Joy has an M.S. in Computational Finance from the Carnegie Mellon University and a Ph.D. in Chemistry from University of Kansas.


         

About the Series

The IAQF's Thalesians Seminar Series is a joint effort on the part of the IAQF (www.iaqf.org) and the Thalesians (www.thalesians.com). The goal of the series is to provide a forum for the exchange of new ideas and results related to the field of quantitative finance. This goal is accomplished by hosting seminars where leading practitioners and academics present new work, and following the seminars with a reception to facilitate further interaction and discussion. 

 

Registration Fees:
Complimentary for IAQF members through this site
Thalesians Members can register here for $25
Non-Members: $25.00 by registering through this site