10.7.10.1 Prepayment Model Structure

A typical Prepayment model structure includes the following:

• Prepayment Drivers: You can build a Prepayment model using one to three prepayment drivers. A driver influences the prepayment behavior of an instrument and is either an instrument characteristic or a measure of interest rates.
• Prepayment Driver Nodes: You can specify one or more node values for each of the prepayment drivers that you select.
• Interpolation or Range method: Interpolation or Range methods are used to calculate prepayment rates for the prepayment driver values that do not fall on the defined prepayment driver nodes.