News
Nordea launches a new model and new curves for Danish mortgage bonds
In the wake of the Euro debt crisis, we have seen a new regime emerge in the Danish mortgage bond market. To enable you to navigate better in these changed market conditions, we are launching a new model and changing the curves used for Danish mortgage bonds.
With these changes you will get improved key figures from Nordea Analytics:
- Higher and more stable OAS on convertibles, in particular for high coupon bonds
- Limited OAS decrease on Cap Floaters
- Lower BPV for longer dated Cap Floaters
- Higher spread risk on convertibles
- More negative convexity on close maturity or below par bonds
- Higher vega – in particular on convertibles
- Limited effect on BPV for convertibles
On the theoretical side, these improvements are achieved through two different model changes:
- The interest rate model has been upgraded to a more sophisticated smile model
- The curves have been changed to OIS based curves
The changes are available in all Nordea Analytics applications from April 10.
