Davidson & Co. is changing how it values hybrid ARMs. Although this is not an overhaul of the firm’s popular prepayment models, it will have a big effect, reported Alex Levin, Davidson’s valuation modeler. The company does plan to launch a new prepayment model later this year. Levin created the firm’s current model using an index based on balloon mortgage data gleaned from histories created by Bloomberg. Every Davidson prepay model relies on a particular…