23.1.1 Average Method

The average method is used to calculate an average value (such as Average Balance, Average Net Rate) over a bucket. The calculation sums up the daily values and divided by the number of days in the bucket.

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Daily Average Balance = Sum of (Daily Balance)/days in the bucket

All simulated events (originations, payments, prepayments, and repricings) are assumed to happen at the end of the event date. This implies that the balance and rate on the day of an event are counted as the value before any changes made by the event. Changes made, impact the value of the next day.