SCR Calculator User Manual

Version 1.13.2.0 Last modified 2024-3-21

Mortgage Loans and Agency Passthroughs

Mortgage cashflows are modelled using the PSA model to reflect their negative interest rate convexity. Parameters needed are:

  • CPR0: starting Conditional Prepayment Rate on an annualised basis. Default value 0.2%.
  • Mths: number of months for the CPR to ramp up to its full level. Default value 30.
  • CPRf: final constant annualised CPR rate. Default value 6%.
  • UpScale: multiplier to the CPR in an interest rates down scenario. When interest rates go down, mortgage prepayment rates tend to go up because (fixed rate) borrowers tend to refinance. Default value 2.
  • DownScale: multiplier to the CPR in an interest rates up scenario. When interest rates go up, mortgage prepayment rates tend to go down because (fixed rate) borrowers stay with their current lenders. Default value 0.5.
  • DelayMths: the number of months until the CPR model kicks in. Default value 0.