I have a query regarding Monte Carlo Model used for valuation of mortgages/CMOs.
When we say we generate a stream of interest rates (forward-looking) for each of months from 0 to 360, what do we exactly mean here? Do we use/ Can we use bootstrapping procedure (from the term structure) to simulate those interest rates for every month from 0 to 360? Or is there any other less-computationally-intensive way?
I know this is out of context for the CFA curriculum. However, i was just trying to develop this model and thought it could be quite a time intensive exercise to generate interest rates for different months uskng bootstrapping.
Any thoughts would be welcome and greatly appreciated. Request @S2000magician to share your views