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arm_risk

arm_risk (routine)

Calculate price/yield, duration, convexity, etc. for ARMs

Introduced in release: 1.2
Component: US MBS
Purpose: Calculates the following risk measures and associated values for a mortgage backed security

       price/yield       ai                 discounted margin
       duration          modified duration  convexity
       price value 01    yield value 1/32
       prev coupon date  next coupon date
       days accrued      days in period     days remaining

Special Considerations: The yield input or output for this routine is the bond equivalent yield not the monthly yield.
The estimated Macaulay duration, estimated modified duration, and estimated convexity calculated by this routine are based on their relationship to the value of a 0.01 swing in basis points, and therefore are approximate, usually matching the discounted cash flow method to three decimal places. The special status codes 4051, 4052, 4053, 4054, and 4055 may be returned by this routine when the security's yield, price, discount, coupon equivalent yield, or bond equivalent yield is so small that it precludes direct calculation of some other analytics, specifically duration and convexity. If this error occurs (unlike almost all other errors), most of the values returned by this routine are correct. The following returned values are correct after any of these status codes:

 price
 yield
 accrued interest
 current yield
 total interest
 coupon interest
 interest on interest
 days in the period
 days accrued
 days remaining
 periods remaining
 next coupon date
 previous coupon date

The following returned values are not correct after any of these status codes:

 duration
 modified duration
 convexity
 price value 01
 yield value 1/32

Results: The results are accurate to as many places as supported by a double precision value.

Error Conditions: Returned values should be ignored for a non-zero status. See Errors.

Last Mod Date: 12/15/1995

Doc Version: 5.0