benbenxiong

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If the prepayments occur within the initial PAC collar for a short time period- nearer towards to lower end of the collar (by that I mean 90-300 collar, prepayments are nearer to 90) -- 90-300 could become 110-320 (both lower end and upper end shift upwards).
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What does 90-300 mean? Correct me as I delve into uncharted territory... If prepayments occur at speeds between 0.9xPSA and 3xPSA you get extra principal payment (a prepayment) based on the lower value of the two. I the collateral continues to prepay at speeds within this range, you will get your principal back in the expected time (according to the schedule of payments that you purchased).

If speeds go above 3xPSA, there is higher prepayments coming in, and you have to take them in (your expected maturity will go down). So, is it correct then to say, if the speed is above 3xPSA you will get that much, and your schedule of principal repayments will be shorter in duration? The support tranches take the hit if the speed is within 90-300PSA, if not you take the hit.