Adjustable-rate mortgages (ARMs) are the subject of this chapter. They are included to provide a more complete picture of the mortgage bond market. Only non-callable bonds are considered in this chapter, as adjustable-rate loans have limited price fluctuations and, most of the time, will have a value around par. A simulation algorithm is developed for redemption payments for annuity loans since, for these loans, redemption payments depend on future fixings of the coupon rates and, thus, are stochastic. For situations in which the redemption schedule is known in advance, how ARMs can be valued in closed form by making a so-called convexity adjustment is demonstrated.