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Agency MBS Current Coupon Calculation from TBA Prices

categories: VOROS Miklos, ZHANG David, YU Yihai, Factor and Risk Modeling, Risk Management, Fixed Income

tags: mbs, agency, current_coupon, tba,

Current coupon yield ("cc") is a headline indicator of Agency MBS performance, and also the starting point of mortgage rate diffusion for option pricing. Although MSCI can access current coupon data from Reuters, it has its own limitations that the proposed solution is able to overcome. This specification describes MSCI's current coupon marking methodology for the relevant agency pass-through types based on TBA prices. The methodology is implemented in python and can be run as a daily process to feed a database with the most recent current coupon values.


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