OAS Subroutine

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AD&Co’s OAS Subroutine is a credit- and option-adjusted valuation system for assessing market and model risk for single-family and multifamily loans, pools, or structured securities (MBS, CMOs, and CRTs). It integrates our LoanDynamics and MacroDynamics models (InterestRateDynamics, HomePriceDynamics, and UnemploymentDynamics) with both novel and conventional financially engineered computational algorithms. Results reflect both prepayment and default options (losses) exercised by borrowers, and prepay risk neutrality that accounts for risk premiums built into MBS prices due to prepayment uncertainty. The OAS Subroutine can also analyze either standard or user-defined scenarios using random Monte Carlo and non-Monte Carlo simulations.

Product users are provided with user guides and a variety of publications that report on model updates, technology developments and related market issues.


Features and Capabilities
Robust Functionalities
  • Embeds popular third-party cashflow waterfalls (e.g. Intex, Moody’s) for structured instruments

  • Covers a wide range of assets including all Single Family and Multifamily loans, pools or structured securities (MBS, CMOs and CRTs) used in our models

  • Provides a cluster/cloud-computing option that increases productivity multi-fold; in some cases users analyze millions of loans, many thousands of MBS or entire markets (e.g. Credit Risk Transfer) on a recurring basis

  • Offers clean product integration bypassing multiple component integration steps


The OAS Subroutine can be delivered in multiple ways. It is available for direct licensing and easy integration into user platforms or through third-party providers. Delivery options include:

  • Third-party systems (see Vendors page)
  • DLLs (for integration into proprietary systems)
  • Indirectly via wholesale agreements

See which vendors have integrated the OAS Subroutine and MacroDynamics.

For questions on optimal system usage and integrations, please contact us.

MacroDynamics Models
The AD&Co OAS Subroutine utilizes the AD&Co suite of macroeconomic models

InterestRateDynamics includes three 1-factor short-rate models (Hull-White, Black-Karasinski, Squared Gaussian) and a 2-factor Gaussian model. Every model can be instantly calibrated to a swap or Treasury curve and a matrix of at-the-money (ATM) swaptions. Each of our models can operate with either time-dependent or constant volatility. With the ATM volatility surface used as the input, the volatility skew is completely controlled by the model selection itself.


HomePriceDynamics simulates home prices consistent with Federal Home Finance Agency (FHFA) historical data. It produces Monte Carlo and scenario analyses of housing prices at national, state, and Metropolitan Statistical Area (MSA) levels. HomePriceDynamics employs a two-phase approach to modeling: (1) a core-index projection (25-MSA, Los Angeles, Miami, New York, and Phoenix MSAs) and (2) a "geographical localizer" that produces housing price forecasts at US, state, and MSA levels.


UnemploymentDynamics is our latest macro-economic model focused on projecting national and regional (states, MSAs) unemployment rates. The model utilizes the latest available actual unemployment as the initial condition, and applies leading changes in interest rates and home prices to project future unemployment rates. The model is designed to be consistent with the 1983-2019 historical data series. UnemploymentDynamics is used for both simulations and scenario analyses and is a critical component of our OAS Subroutine, operating with our latest LoanDynamics 3.0 model.

Supporting Resources
OAS Excel

The OAS Subroutine Excel spreadsheet deploys an Excel interface to link to the OAS computational library, third-party structured deal providers (Intex or Moody's/Chasen) and Bloomberg data (including agency disclosed items). It offers a mini-database and simple front-end, combined with cutting-edge valuation analytics. Pre-programmed calls to the Bloomberg API seamlessly fill in many of the required fields on the Market Sheet, ARMs Sheet, MBS Sheet, and Enhanced Data Sheet, greatly reducing the amount of information that must be entered manually.

Market Analysis Reports

Our market analysis reports consist of a weekly prepayment-risk-and-option-adjusted analysis, across the coupon stack, of the agency and government passthrough markets.

CRT Monitor

The CRT Monitor is a monthly report analyzing traded tranches of Agency Credit Risk Transfer deals. We derive a credit risk rating, our CreditProfile Category (CPC), the underlying credit metrics, and Option-Adjusted Spreads (OAS) given market levels at the close of a month. The underlying analysis is performed using RiskProfiler, our end-user valuation solution, and LoanDynamics credit model.

US Mortgage High Yield Index

The AD&Co US Mortgage High Yield Index (USMHY) tracks the total return of the bonds issued within the CRT programs of Fannie Mae and Freddie Mac. USMHY is an informational, investment-oriented monthly index of the return components: price, coupon, paydown, and credit loss. Accompanied by standard risk metrics from our models, the index is useful for comparisons with individual CRT bonds or relative value to other credit markets.