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Date Published: May 8, 2018
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Part of the Guide to Terminology and Calculations for Mortgage-Backed Securities.
The full price of the MBS, assuming a single tranche that repays at time M, is calculated:
[11]
where
| a= | Number of days from settlement to the 15th of next month Number of days in the settlement month |
Accrued interest per $100 is calculated:
[12]
where
| d= | Number of days from 1st of settlement month to settlement date Number of days in settlement month |
c=monthly MBS coupon
The market price is simply the full MBS price less accrued interest:
P=FP - AI [13]
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