computing SMM

[coquin22]

Computing for 5th and 25th months assuming 100PSA and 150 PSA
I believe that the 150PSA@month 25 is wrong,
CPR@25m =0,02*25=0,05
150 PSA -> 1,5*0,05=7,5
(from Schweser)
should it be capped @6%?

 

[ShaktiRathore]

Hi,
CPR for 150 PSA just multiplies CPR rate for a 100 PSA by 1.5 till month 30 and beyond, after month 30 CPR for 150 PSA becomes constant at 6%*1.5=9%.thus entire CPR curve of 100 Psa shifts upby 1.5 times 100 Psa.thus CPR for 150 Psa will be capped at 9% not 6%.
Thanks

 

[David Harper CFA FRM]

I agree with ShaktiRathore The cap for 150 PSA is 1.5*6% =9%. The CPR at month 25 for 150 PSA = (6%*25/30) *150% = (0.2%*25)*150% = 7.5%. Thanks,