Difference between revisions of "Absolute Prepayment Rate"
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== Definition == | == Definition == | ||
| − | '''Absolute Prepayment Rate''' | + | '''Absolute Prepayment Rate''' (ABS) measures the monthly rate of loan prepayments as a percentage of the original pool balance. |
| − | |||
| − | ABS measures the monthly rate of loan prepayments as a percentage of the original pool balance. | ||
== Formula == | == Formula == | ||
| Line 8: | Line 6: | ||
:<math> | :<math> | ||
| − | ABS = (100 * SMM)/100 + (SMM | + | ABS = (100 * SMM)/100 + (SMM x (Age- 1) |
</math> | </math> | ||
| + | == Usage == | ||
| + | The absolute prepayment rate is the standard measure of [[Prepayment]] rates in the auto-loan sector. | ||
== Issues and Challenges == | == Issues and Challenges == | ||
Revision as of 13:27, 1 December 2022
Definition
Absolute Prepayment Rate (ABS) measures the monthly rate of loan prepayments as a percentage of the original pool balance.
Formula
ABS is defined by the following formula where SMM refers to Single Monthly Mortality, which measures the percentage of dollars prepaid in a given month expressed as a percentage of the scheduled loan balance.
Usage
The absolute prepayment rate is the standard measure of Prepayment rates in the auto-loan sector.
Issues and Challenges
The ABS measurement differs from Conditional Prepayment Rate (CPR) used in the mortgage industry, which measures prepayment as an annualized percentage of the current pool balance.
Disclaimer
This entry annotates a FIBO Ontology Class. FIBO is a trademark and the FIBO Ontology is copyright of the EDM Council, released under the MIT Open Source License. There is no guarantee that the content of this page will remain aligned with, or correctly interprets, the concepts covered by the FIBO ontology.
