Computation of the endogenous mortgage rates with randomized quasi-Monte Carlo simulations

The problem of computing the mortgage rate implied by a prepayment and interest rate model is considered. A Monte Carlo algorithm that uses a correlated sampling approach is introduced to simulate the model. Numerical results are used to compare Monte Carlo and randomized quasi-Monte Carlo methods with a numerical PDE solution. A particular randomized quasi-Monte Carlo method, random-start scrambled Halton sequence, gives superior performance, especially in high dimensions.