medium · Debt Capital Markets
Under the PSA (Public Securities Association) prepayment convention, what does '100% PSA' represent?
- The assumption that exactly 100 homes are sold in the pool each month.
- A constant 100% probability that every borrower will refinance their mortgage this year.
- A prepayment rate that is exactly double the prevailing SOFR rate.
- A CPR that starts at 0.20% in month 1 and increases by 0.20% each month until reaching 6.00% in month 30.
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