The Pace analysis is conducted based on populations: Performing, Defaulted and Prepaid. The calculations are based on the performing factors of these populations. The assumption is that the pool will begin with a performing factor of 1 for the performing pool, 0 for default and 0 for prepaid. The populations factor will shift between states as they stress according to the parameters below.
Parameter Name | Details | Calculation |
Prepayment | Under the Prepayment scenario, the user can model a prepayment in which a part of the collateral pool prepays their loans, and exists within the pool. The Prepayment will be recognized by the frequency defined under Portfolio > Prepayment. | Prepayment $ = (Beginning Performing Balance - Scheduled Principal * (Beginning Performing Balance / (Beginning Performing Balance - Default))) * frequency adjusted prepayment percentage |
Pace Default Mode | The user can select if they want to model Default Timing Curve or First Time Default Timing Curve.
This allows the user to input a lifetime expected loss and to spread it out in time (Default Timing Curve), or to specify at any point in time which fraction of the current performing balance goes into default (First-Time Default Curve). |
|
>Probability of Default | Only relevant for Default Timing Curve. The user can define the probability of the default, which is the portion of the pool that will default during the life of the deal, as a percentage of the initial collateral balance. |
|
>Default Timing Curve | The user can define the timing curve in which the default will be distributed across the life of the deal. The sum of the elements must be equal to 100.
The default schedule represents the defaulted amount, and the starting day of each initial default event.
Period 0 will be the latest of the Cut-Off-Date, the Historical Data Through, and Pre-Funded Month. | Lifetime Default Amount ($) = Probability of Default (%) * Initial Collateral Balance ($)
Default Schedule ($ vector) = Default Timing Curve (vector) * Lifetime Default Amount ($) |
>Default Periods | The length in months of each default events. |
|
>Loss Given Default | The percentage of the delinquent balance that will not reperform (permanent default).
The defaulted amount will not accrue any interest or principal payments. These shortfalls will be recorded as delinquent interest and delinquent principal.
Delinquent interest and delinquent principal accrued during the Default Event (payment in arrears) are recovered at the rate of (1 - Loss Given Default (%)) at the end of the Default Event. | (1 - Loss Given Default (%))*Delinquent Interest = Delinquent Accrued over Default Event Interest Recovery End of Default Event
(1 - Loss Given Default (%))* Delinquent Principal = Delinquent Accrued over Default Event Principal Recovery End of Default Event
Loss = Loss Given Default End of Default Event (%) * Delinquent Principal Accrued over Default Event |
>Reperforming Period | Only relevant for Default Timing Curve. At the end of a Default Event, the defaulted amount of the loan reforms for the number of months specified in this field. The user can set on which period the recovered balance will start making payments. |
|
>Default Sequences | Only relevant for Default Timing Curve. A single Default Sequence is a Default Event followed by a Reperforming Event. This field denotes the number of Default Sequences that follow an initial Default Event. The user can set how many occurrences of the default event will occur during the life of the deal, a.k.a how many transitions between performing and delinquent will occur. | Where Default Sequences > 1: Defaulted Amount = Defaulted Current Default Sequence Amount *
Probability of Previous Default Sequence Default (%) |