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mbsyield2speed

Implied PSA prepayment speeds given yield

Syntax

[ImpSpdOnYld, ImpSpdOnDur, ImpSpdOnCnv] = mbsyield2speed(Yield,
Settle, Maturity, IssueDate, GrossRate, PrepayMatrix, CouponRate,
Delay)

Arguments

Yield

Mortgage yield, compounded monthly, in decimal.

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

[ImpSpdOnYld, ImpSpdOnDur, ImpSpdOnCnv] = mbsyield2speed(Yield, Settle, Maturity, IssueDate, GrossRate, PrepayMatrix, CouponRate, Delay) computes PSA prepayment speeds implied by pool yields and projected (user-defined) prepayment vectors. The calculated PSA speed produces the same yield, 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

Calculate the equivalent PSA benchmark prepayment speeds for a security with these characteristics and prepayment matrix.

Yield = 0.065;
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;

[ImpSpdOnYld, ImpSpdOnDur, ImpSpdOnCnv] = ... 
mbsyield2speed(Yield, Settle, Maturity, IssueDate, GrossRate, ... 
PrepayMatrix, CouponRate, Delay)
ImpSpdOnYld =

  117.7644

ImpSpdOnDur =

  116.7436

ImpSpdOnCnv =

  108.3309

References

[1] PSA Uniform Practices, SF-49

See Also

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