AD&Co US Mortgage High Yield Index, GSE and Borrower Options-Adjusted Spread: Tier 3 (CROASGSECALLTIER3)

Source: Andrew Davidson & Co., Inc.  

Release: AD&Co US Mortgage High Yield Index  

Units:  Index, Not Seasonally Adjusted

Frequency:  Monthly

The AD&Co US Mortgage High Yield Index crOAS, GSE-and-Borrower-options-adjusted spread, is an extension of the traditional OAS measure. On a set of 20 standardized, market-and-model stress scenarios, AD&Co solves an approximate partial differential equation (PDE) of periodic return, starting from maturity and inducting backwards. It computes a discount spread over Treasury that equates tranche's value at time-0 to the observed market price. The cash flows and balances are loss-adjusted using AD&Co's LoanDynamics Model (LDM) and the CRT values are capped by available GSE call options.

Investors and fund managers can use the index to assess the broad market returns, risks and opportunities available through investing in a market-weighted, passive portfolio of US mortgage credit risk transfer instruments. The Index also provides a means of comparing the returns of an actively managed portfolio against a passive, naive market portfolio as approximated by the Index. The Mid-Tier and its sub-indices allow for approximations of performance comparisons by vintage or age, across the capital stack, and by initial credit risk level and/or vintage as indicated by original attachment point.

Cross-reference CROASTIER3 as a version computed without GSE call consideration.

Disclaimer: The AD&Co U.S. Mortgage High-Yield Index serves as an informational index and is not for commercial-use purposes. The Index's accuracy, completeness, timeliness and suitability for any purpose are not guaranteed. The Index does not constitute (1) investment, legal, accounting, tax, or other professional advice or (2) any recommendation or solicitation to purchase, hold, sell, or otherwise deal in any investment. This Index has been prepared for general informational purposes, without consideration of the circumstances or objectives of any particular investor. Any reliance on the Index is at the reader's sole risk. All investment is subject to numerous risks, known and unknown. Past performance is no guarantee of future results. For investment advice, seek a qualified investment professional. Not for redistribution without permission. Note: An affiliate of Andrew Davidson & Co., Inc. engages in trading activities in investments that may be the same or similar to those featured in the Index.

Index Inclusion Rules
Only cash CAS and STACR bonds offered to the public, whether they are exchangeable or not, that have or have had IDC prices.
Bond factor > = .25
Floating rate bonds only.
Collateral Types 30 Year Residential.
Fixed Rate: STACR-DN, DNA, HQ, HQA, HRP, CAS - all
Tranche names - B, B1, B2, M3, M2, M1, M1A, M1B, A1
Normally listed on GSE websites: Freddie Mac, Fannie Mae
No private placements
No Child Classes (Exchangeable into) or Retained Classes (H bonds)
No CIRT, ACIS, SPI
Original attachment points and CAS STACR

Tier Attachment Points CAS STACR Class

0> = 0.00 < .25STACR Class B, B2; CAS Class B

1> = 0.25 < .95STACR Class B1, Old M3; CAS Class B1

2> = 0.95 < 1.75STACR Class M3, M2; CAS Class M2

3> = 1.75 < 3.75STACR Class M2, M1; CAS Class M1Mid> = 0.25 < 3.75STACR Class Mixed; CAS Class Mixed

Input data provided by Intex and ICE Data Services.

Andrew Davidson & Co., Inc. All rights reserved.