ECS Calculator™

ECSCalculator™ implements the BMA's Guidelines for European-type Callable Agency Bonds

This standard for quoting the prices of qualifying Agency bonds was established by The Bond Market Association in 2003, and is fully supported by the largest broker-dealers. Significant features of the BMA OAS formula include:

  • Issuer-specific yield curves (based on live prices of Fannie Mae Benchmark Notes and Freddie Mac Reference Notes )
  • Skew-adjusted volatility
  • Valuation of the call option using Black '76 formula (instead of a lattice-based method)

ECSCalculator™ computes the OAS of bonds with European-type call option using a method endorsed by The Bond Market Association. Calculator features include:

Valuation

  • Option Adjusted Spread (OAS) corresponding to a price
  • Fair value given an OAS
  • Effective duration, convexity, DV01
  • Implied volatility given bond's price
  • Fair coupon for a specified structure
  • Vega
  • Option value given bullet price
  • Skew exponent can be changed from BMA recommended value

Standard Bond Measures

  • YTM, YTC
  • Accrued interest
  • Modified duration and convexity

Technical Specifications

  • Runs on all versions of Windows
  • All reports export to Excel
  • Can be customized to accept live benchmark rate feeds
  • Can be adapted to import user's bond database
  • Functionality available as a library

The BMA guidelines bring the cash and derivative segments of the markets closer together. The BMA formula integrates the concept of OAS, traditionally used exclusively for bonds, and the Black '76 formula, traditionally for interest rate derivatives. Also, the guidelines are already used by major market participants in the U.S. federal agency market, the largest and most liquid bond market in the world.

The ECSCalculator™ is sufficiently flexible to be used with other yield curves (e.g., swap, Treasury, etc.).