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mbsprice2speed

Implied PSA prepayment speeds given price

Syntax

[ImpSpdOnPrc, ImpSpdOnDur, ImpSpdOnCnv] = mbsprice2speed(Price,
Settle, Maturity, IssueDate, GrossRate, PrepayMatrix, CouponRate,
Delay)

Arguments

Price

Clean price for every $100 face value.

Settle

Settlement date. A serial date number or date string. Settle must be earlier than Maturity.

Maturity

Maturity date. A serial date number or date string.

IssueDate

Issue date. A serial date number or date string.

GrossRate

Gross coupon rate (including fees), in decimal.

PrepayMatrix

Customized prepayment matrix. A matrix of size max(TermRemaining)-by-NMBS. Missing values are padded with NaNs. Each column corresponds to a mortgage-backed security, and each row corresponds to each month after settlement.

CouponRate

(Optional) Net coupon rate, in decimal. Default = GrossRate.

Delay

(Optional) Delay (in days) between payment from homeowner and receipt by bondholder. Default = 0 (no delay between payment and receipt.

All inputs (except PrepayMatrix) are number of mortgage-backed securities (NMBS)-by-1 vectors.

Description

[ImpSpdOnPrc, ImpSpdOnDur, ImpSpdOnCnv] = mbsprice2speed(Price, Settle, Maturity, IssueDate, GrossRate, PrepayMatrix, CouponRate, Delay) computes PSA prepayment speeds implied by pool prices and projected (user-defined) prepayment vectors. The calculated PSA speed produces the same price, modified duration, or modified convexity, depending upon the output requested.

ImpSpdOnPrc calculates the equivalent PSA benchmark prepayment speed for the pass-through to carry the same price.

ImpSpdOnDur calculates the equivalent PSA benchmark prepayment speed for the pass-through to carry the same modified duration.

ImpSpdOnCnv calculates the equivalent PSA benchmark prepayment speed for the pass-through to carry the same modified convexity.

All outputs are NMBS-by-1 vectors.

Examples

expand all

Compute PSA Prepayment Speeds

This example shows how to compute the equivalent PSA benchmark prepayment speeds for a mortgage pool with the following characteristics and prepayment matrix.

Price        = 101;
Settle       = datenum('1-Jan-2000');
Maturity     = datenum('1-Jan-2030');
IssueDate    = datenum('1-Jan-2000');
GrossRate    = 0.08125;
PrepayMatrix = 0.005*ones(360,1);
CouponRate   = 0.075;
Delay        = 14;

[ImpSpdOnPrc, ImpSpdOnDur, ImpSpdOnCnv] = ...
mbsprice2speed(Price,Settle, Maturity, IssueDate, ...
GrossRate, PrepayMatrix, CouponRate, Delay)
ImpSpdOnPrc =

  118.5980


ImpSpdOnDur =

  118.3946


ImpSpdOnCnv =

  109.5115

References

[1] PSA Uniform Practices, SF-49

See Also

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