Question: Suppose that 6 representative paths are used in a Monte Carlo model. The representative paths have a weight of 14%, 20%, 17%, 21%, 12%, and

Suppose that 6 representative paths are used in a Monte Carlo model. The representative paths have a weight of 14%, 20%, 17%, 21%, 12%, and 16%, respectively. The present value for each representative path is based on discounting the cash flow on the interest rate path by the spot rates on that path plus an OAS. The following table shows the present value of each representative path for a CMO tranche. The market price of this tranche is $74.86.

What is your best estimate of the OAS?

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