Mortgage Pass-Through

Determine cash flows, convexity, and duration for mortgage pools, compute option-adjusted spreads and model prepayment speeds

Functions

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Cash Flow

mbscfamounts Cash flow and time mapping for mortgage pool

Convexity

`mbsconvp`	Convexity of mortgage pool given price
`mbsconvy`	Convexity of mortgage pool given yield

Duration

`mbsdurp`	Duration of mortgage pool given price
`mbsdury`	Duration of mortgage pool given yield

Yields

`mbsnoprepay`	End-of-month mortgage cash flows and balances without prepayment
`mbspassthrough`	Mortgage pool cash flows and balances with prepayment
`mbsprice`	Mortgage-backed security price given yield
`mbswal`	Weighted average life of mortgage pool
`mbsyield`	Mortgage-backed security yields given price

Prepayment

`mbsprice2speed`	Implied PSA prepayment speeds given price
`mbsyield2speed`	Implied PSA prepayment speeds given yield
`psaspeed2default`	Benchmark default
`psaspeed2rate`	Single monthly mortality rate given PSA speed

Option-Adjusted Spread

`mbsoas2price`	Price given option-adjusted spread
`mbsoas2yield`	Yield given option-adjusted spread
`mbsprice2oas`	Option-adjusted spread given price
`mbsyield2oas`	Option-adjusted spread given yield

Examples and How To

Fixed-Rate Mortgage Pool

Generic fixed-rate mortgage pools and balloon mortgages have pass-through certificates (PC) that typically have embedded call options in the form of prepayment.

Pricing Mortgage Backed Securities Using the Black-Derman-Toy Model

This example illustrates how the Financial Toolbox™ and Financial Instruments Toolbox™ are used to price a level mortgage backed security using the BDT model.

Computing Option-Adjusted Spread

The option-adjusted spread (OAS) is an amount of extra interest added to the reference zero curve.

Prepayments with Fewer Than 360 Months Remaining

When fewer than 360 months remain in the pool, the applicable PSA prepayment vector is "seasoned" by the pool's age.

Pools with Different Numbers of Coupons Remaining

Pools with different numbers of coupons remaining require a specific prepayment matrix format.

Prepayment Modeling with a Two Factor Hull White Model and a LIBOR Market Model

This example shows how to model prepayment in MATLAB® using functionality from the Financial Instruments Toolbox™.