VIGRE2 Vertical Intergration of Research and Education Department of Mathematics, University of Utah

Pattie Dunn








Mentor: Jingyi Zhu
Major: Mathematics

Summer 2008 project description

I will be doing my summer research project with professor Jingyi Zhu and we will be looking into the relationships between credit risk and the mortgage prices in this project. There is an enormous amount of credit risk in the mortgage sector and government statistics show that approximately 3.8 trillion dollars in single-family residential mortgages were originated every year. Thus, even a very small percentage of credit loss on such an enormous asset class would have serious repercussions for the U.S. economy. As non-agency mortgage-backed securities(MBS) and mortgage-related asset-backed securities(ABS) emerge significantly in recent years and the historically risk-protected government sponsored housing enterprises (Fannie Mae, Freddie Mac and Ginnie Mae) decrease in dominating the sector, more credit risk is being faced by both financial banking institutions and investors. In this project, we will look into and compare the different Mathematical models used in calculating mortgage prices and credit risks (eg: scoring models, roll rate/migration models, loss actuary models, option-based structural models...etc.) and do appropriate analysis about them.