Fixed-Income Toolbox™

mbswal - Weighted average life of mortgage pool

Compatibility

PSA

Syntax

WAL =  mbswal(Settle, Maturity, IssueDate, GrossRate, CouponRate, 
Delay, PrepaySpeed, PrepayMatrix)

Arguments

`Settle`	Settlement date. A serial date number or date string. `Settle` must be earlier than or equal to `Maturity`.
`Maturity`	Maturity date. A serial date number or date string.
`IssueDate`	Issue date. A serial date number or date string.
`GrossRate`	Gross coupon rate (including fees), in decimal.
`CouponRate`	(Optional) Net coupon rate, in decimal. Default = `GrossRate`.
`Delay`	(Optional) Delay (in days) between payment from homeowner and receipt by bondholder. Default = 0 (no delay between payment and receipt).
`PrepaySpeed`	(Optional) Relation of the conditional payment rate (CPR) to the benchmark model. Default = end of month's CPR. Set `PrepaySpeed` to `[]` if you input a customized prepayment matrix.
`PrepayMatrix`	(Optional) Customized prepayment matrix. A matrix of size `max(TermRemaining)`-by-`NMBS`. Missing values are padded with `NaN`s. Each column corresponds to a mortgage-backed security, and each row corresponds to each month after settlement.

All inputs (except PrepayMatrix) are number of mortgage-backed securities (NMBS) by 1 vectors.

Description

WAL = mbswal(Settle, Maturity, IssueDate, GrossRate, CouponRate, Delay, PrepaySpeed, PrepayMatrix) computes the weighted average life, in number of years, of a mortgage pool, as measured from the settlement date.

Examples

Given a pass-through security with the following characteristics, compute the weighted average life of the security.

Settle = datenum('15-Apr-2002');
Maturity = datenum('1 Jan 2030');
IssueDate = datenum('1-Jan-2000');
GrossRate = 0.08125;
CouponRate = 0.075;
Delay = 14;
Speed = 100;

WAL = mbswal(Settle, Maturity, IssueDate, GrossRate, ... 
CouponRate, Delay, Speed)

WAL =

   10.5477

References

[1] PSA Uniform Practices, SF-49