Skip to Main Content
Fixed Income Mathematics
book

Fixed Income Mathematics

by Robert Zipf
June 2003
Beginner content levelBeginner
366 pages
9h 16m
English
Academic Press
Content preview from Fixed Income Mathematics
Prepayment speeds are measured as a percentage of the PSA. For example,
if a mortgage pool has a PSA of 200% and is more than 30 months old, the
annual prepayment rate is 12% (= 6% • 2.00).
PSA percentages can be used to change the flow of funds of a pool, or issue
of CMO securities, under the terms of the original bond contract. For example,
in Table 21.1, suppose all prepayment are used to redeem bonds in Tranche 4.
However, the contract might say that if the PSA reaches or exceeds 200%, then
bonds in Tranche 3 will receive 10% of the prepayments, with only 90% of the
prepayments used to redeem bonds in Tranche 4. This means that if, after 30
months, the annual prepayment rate equals or exceeds 12%, then 10% of the
prepayments will be used to redeem ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Start your free trial

You might also like

Mathematical Techniques in Finance

Mathematical Techniques in Finance

Amir Sadr
Financial Mathematics

Financial Mathematics

Giuseppe Campolieti, Roman N. Makarov

Publisher Resources

ISBN: 9780127817217