10.7.11 PSA Method

The PSA Prepayment method (Public Securities Association Standard Prepayment Model) is a standardized prepayment model that is built on a single dimension, the remaining term.

The PSA curve is a schedule of prepayments that assumes that prepayments will occur at a rate of 0.2 percent CPR in the first month and will increase an additional 0.2 percent CPR each month until the 30th month and will prepay at a rate of 6 percent CPR thereafter ("100 percent PSA"). PSA prepayment speeds are expressed as a multiple of this base scenario. For example, 200 percent PSA assumes annual prepayment rates will be twice as fast in each of these periods -- 0.4 percent in the first month, 0.8 percent in the second month, reaching 12 percent in month 30 and remaining at 12 percent after that. A zero percent PSA assumes no prepayments.

You can create your own origination date ranges and assign a particular PSA speed to all the instruments with origination dates within a particular origination date range.

Note:

PSA speed inputs can be between 0 and 1667.