Overshooting

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Overshooting

The tendency of a pool of MBS to reflect an especially high rate of prepayments the first time it crosses the threshold for refinancing, specially if two or more years have passed since the date of issue without the weighted average coupon of the pool crossing the refinancing threshold.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
References in periodicals archive ?
We examine this case study through the lens of the overshooting model.
In the overshooting model, we illustrated how media amplification can drive the elite end of a sport so far from the entry level that it can cause catastrophic harm to the sport.
Our more sophisticated model--the overshooting model of Earl and Potts (2013)--suggested a broad class of exceptions in consequence of infra-sports Schumpeterian competition, illustrated by our case study on windsurfing (Thomas and Potts, 2014).
Therefore, some macroeconomic concepts can be used in their analysis, for example, the neutrality of money, the interest rate parity, rational expectations, and particularly Dornbusch [4] overshooting model (given the fact that commodity prices behave similarly to financial assets, they may be good predictors of future changes in aggregate price levels and production.
This author extends Dornbusch [4] exchange rate overshooting model to the case of commodity prices and using no arbitrage conditions explains the link between these two variables.
The fact that commodity prices respond more than proportionally to movements in the monetary policy rate is explained following Dornbusch's overshooting model once the exchange rate for commodity prices is replaced.
Frankels theory builds on the work of Dornbusch [4] overshooting model but substitutes the exchange rate by commodity prices.
Frankel [11] explains the overshooting model as follows: suppose that there is an increase in the nominal interest rate or an equivalent drop in money supply which is expected to be permanent (see Figure 1).
"Expectations and Commodity Price Dynamics: The Overshooting Model," American Journal of Agricultural Economics 68 (May 1986) 344-48.
The Dornbusch overshooting model assumed sticky goods prices, and showed that a monetary shock can yield exchange rate overshooting.