New York City, June 16, 2004 --- Demonstrating its continued dedication to innovation, Andrew Davidson & Co., Inc. is delighted to announce the launch of ValueNet, a new valuation system that uses a cohesive set of new techniques and models to more fully capture the risk profile of Mortgage-Backed Securities (MBS).

Three major developments have been synthesized into a cohesive framework that goes beyond the results of traditional approaches. First, an Active-Passive Decomposition (APD) form of the prepayment model has been implemented. APD splits an MBS pool into two path dependent components, enabling the use of backward induction pricing as an alternative to Monte Carlo. Backward induction reduces the lengthy computational time of OAS analysis using Monte Carlo while delivering a richer set of results. Secondly, the company has developed a Prepayment-Risk-and-Option-Adjusted-Spread (prOAS) calculation library driven by a risk-neutral prepayment engine that adjusts value for the risk of prepayment uncertainty not captured by a model. The prOAS methodology addresses the shortcomings of standard OAS analysis, namely the variability in OAS across instruments from the same agency and equal credit quality. The third new ValueNet application is an Enhanced Pool Level Prepayment Model which employs newly available GSE agency disclosure data such as weighted averages for loan size, FICO score, LTV and states of origination, allowing for more accurate and refined pool level prepayment forecasting.

ValueNet offers mortgage portfolio and servicing managers, traders and research professionals a more appropriate relative benchmark. "It is not often that we can say that we have something truly new, but ValueNet provides new insight into MBS risk and value. ValueNet provides the ability to value a wide range of securities in a common framework and opens up new avenues for identifying arbitrage opportunities."

Alex Levin, Senior Quantitative Developer/Consultant, has written a three part Quantitative Perspectives series detailing the research and analysis involved in developing the components of the ValueNet. The comprehensive research piece, "Divide & Conquer: Exploring New OAS Horizons, Parts I, II & III" is available at the Andrew Davidson & Co., Inc. website www.ad-co.com.

Andrew Davidson & Co., Inc. plans to unveil ValueNet at its 12th Annual Conference in New York City on June 17.

About AD&Co.
Andrew Davidson & Co., Inc. provides consulting services, litigation support, and risk analytics for mortgage and asset-backed securities. Their VectorsTM analytics library currently offers prepayment models for both fixed and adjustable rate mortgages, prepayment models for asset-backed securities, option-adjusted valuation and risk management tools for MBS, ABS, CMOs, and interest rate processes. The company's unique blend of consulting experience and expertise with cutting-edge quantitative methods allows it to combine decades of Wall Street experience with the most advanced modeling techniques to produce informed, effective third-party software.

Contact: Rob Landauer
Andrew Davidson & Co., Inc.
212-274-9075
rob@ad-co.com