Fixed Income... The lurking giant

[MrSmart]

@S2000magician

@MrSmart

Or CPR = 1 - 1/(1+SMM)^12 (less approximate)

This one makes no sense, approximately or not.

It doesn’t make sense, it’s an approximation, simillar to eurodollar futures for hedging.

[defacto]

Whach’all talking about?

SMM = 1-(1-CPR)1/12

“Sammy, call 1-1 to perform CPR on one-twelve”

[S2000magician]

@MrSmart

@S2000magician

@MrSmart

Or CPR = 1 - 1/(1+SMM)^12 (less approximate)

This one makes no sense, approximately or not.

It doesn’t make sense, it’s an approximation, simillar to eurodollar futures for hedging.

I understand that 1 − x ≈ 1 / (1 + x), but it’s bizarre to use such an approximation when the actual value is available for the same amount of work.