CPR Calculation Question figure

dmrktrading

Reading 57: Mortgage Backed Securities
Page 57
Problem 6

How does the author derive the CPR figure from the PSA?

Thanks.

wilslm

Figured it out.

CPR = (Month * .2%) to a max of 6% * (PSA/100)

random_walker47

easier way than remembering that formula: 2% per month, for say 12 months= 2.4%, and say we are using 150 PSA, then just 2.4*1.5= 3.6%

yalo

^ if thats how you guys do math up in Boston I am going to your local bank to get a loan at 2% per month and end up paying 2.4% a year

lol, @#$%&

ayodayo

three general formulas used for CPR


CPR = 6% x n/30 x (PSA/100) n = number of months left to maturity

CPR = 1 - (1 - SMM) power 12

SMM = Prep / (outstanding balance + interest - payment )


correct me if im wrong

thanks

ap0258

^Officer on deck

19831985

lol ya i kept it in regular percentages to avoid confusion...you will still get the right answer. Or you could just do it the correct way. Easier to remember though.

gulfcfa Wrote:
-------------------------------------------------------
> ^ if thats how you guys do math up in Boston I am
> going to your local bank to get a loan at 2% per
> month and end up paying 2.4% a year
>
> lol, @#$%&

Houjichasan

Let me draw your attention on this point:

Beware when the pool of loans is seasoned so as to adjust the PSA calculation.

madaochenggong

sure bilal, i thought by payment you ment schedualed principle payment

no mistake on your side, just a wrrong assumption on mine

comp_sci_kid

gulfcfa, are you from the gcc region?