C6 HOFIS Pass-thrus Page 617

[Looking Forward]

in the formulas for calculating "average life" and "Macaulay D", (t + a - 1) was used.

suppose a=0.5, the collected principle for month 1 should be delivered at month 1.5, reflecting a half-month payment delay.

If it's true, using (t+a) seems making more sense.

Appreciate any comments.

[FIOB]

My guess is that if there is a half month payment delay, then a = 1.5. If there was no delay, then the first cash flow would be at the end of the first month when time=1, not time=0. In other words, a 15 day delay means the payment is made a month and a half after the interest started accruing.

[New at pd]

To me it doesn't matter what the formula is, it's just the weighted average of the PV of future cash flows, where the weighting is done by time from now until CF is realized.