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The LOAN Procedure |

**ARM***options;*

In addition to the required specifications and options listed under the FIXED statement, you can use the following options with the ARM statement:

**ADJUSTFREQ=***n*-
specifies the number of periods
(in terms of the INTERVAL= specification) between rate adjustments.
INTERVAL=MONTH ADJUSTFREQ=6 indicates that the nominal interest
rate can be adjusted every six months until the life cap or maximum rate
(whichever is specified) is reached.
The default is ADJUSTFREQ=12.
The periodic payment is adjusted every adjustment period even if
there is no rate change; therefore, if prepayments are made (as specified with
the PREPAYMENTS= option), the periodic payment might change even if
the nominal rate does not.

The ADJUSTFREQ= option can be abbreviated ADF=. **CAPS=***( periodic-cap, life-cap*)-
specifies the maximum interest rate adjustment (in percent notation)
allowed by the loan agreement.
The
*periodic cap*specifies the maximum adjustment allowed at each adjustment period. The*life cap*specifies the maximum total adjustment over the life of the loan. For example, a loan specified with CAPS=(0.5, 2) indicates that the nominal interest rate can change by 0.5% each adjustment period, and the annual nominal interest rate throughout the life of the loan will be within a 2% range of the initial annual nominal rate. **MAXADJUST=***rate*-
specifies the maximum rate adjustment (in percent notation)
allowed at each adjustment period.
Use the MAXADJUST= option with the MAXRATE= and MINRATE= options.
The initial nominal rate plus the maximum adjustment should not
exceed the specified MAXRATE= value. The initial nominal rate minus the maximum
adjustment should not be less than the specified MINRATE= value.

The MAXADJUST= option can be abbreviated MAXAD=. **MAXRATE=***rate*-
specifies the maximum annual nominal rate
(in percent notation) that might be charged on the loan.
The maximum annual nominal rate
should be greater than or equal to the initial annual nominal rate
(the RATE= option value, if specified).

The MAXRATE= option can be abbreviated MAXR=. **MINRATE=***rate*-
specifies the minimum annual nominal rate (in percent notation)
that might be charged on the loan.
The minimum annual nominal rate
should be less than or equal to the initial annual nominal rate
(the RATE= option value, if specified).

The MINRATE= option can be abbreviated MINR=.

**BESTCASE**-
specifies a best-case analysis.
The best-case analysis assumes the interest rate charged on the loan will
reach its minimum allowed limits at each adjustment period and over the
life of the loan.
If you use the BESTCASE option, you must specify either the CAPS= option
or the MINRATE= and MAXADJUST= options.

The BESTCASE option can be abbreviated B. **ESTIMATEDCASE=***(date1=rate1 date2=rate2 ...)***ESTIMATEDCASE=***(period1=rate1 period2=rate2 ...)*- specifies an estimated case analysis that indicates the
rate adjustments will follow the rates you predict.
This option specifies pairs of periods and estimated nominal
interest rates.

The ESTIMATEDCASE= option can be abbreviated ESTC=.

The ESTIMATEDCASE= option can specify adjustments that cannot fit into the BESTCASE, WORSTCASE, or FIXEDCASE specifications, or "what-if" type analysis. If you specify the START= option, you can also specify the estimation periods as dates. Estimated rates and the respective periods must be in time sequence.

If the estimated period falls between two adjustment periods (determined by ADJUSTFREQ= option), the rate is adjusted in the next adjustment period. The nominal interest rate charged on the loan is constant between two adjustment periods.

If any of the MAXRATE=, MINRATE=, CAPS=, and MAXADJUST= options are specified to indicate the rate adjustment terms of the loan agreement, these specifications are used to bound the rate adjustments. By using the ESTIMATEDCASE= option, you are predicting what the annual nominal rates in the market will be at different points in time, not necessarily the interest rate on your particular loan. For example, if the initial nominal rate (RATE= option) is 6.0, ADJUSTFREQ=6, MAXADJUST=0.5, and the ESTIMATEDCASE=(6=6.5, 12=7.5), the actual nominal rates charged on the loan would be 6.0% initially, 6.5% for the sixth through the eleventh periods, and 7.5% for the twelfth period onward. **FIXEDCASE**-
specifies a fixed case analysis that assumes the rate will stay constant.
The FIXEDCASE option calculates the ARM loan
values similar to a fixed rate loan, but the payments are updated
every adjustment period even if the rate does not change, leading to
minor differences between the two methods.
One such difference is in the way prepayments are handled.
In a fixed rate loan, the rate and the payments are never
adjusted; therefore, the payment stays the same over the life
of the loan even when prepayments are made (instead, the life of
the loan is shortened). In an ARM loan with the FIXEDCASE option, on the other hand, if
prepayments are made, the payment is adjusted in the following
adjustment period (leaving the life of the loan constant).

The FIXEDCASE option can be abbreviated FIXCASE. **WORSTCASE**-
specifies a worst-case analysis.
The worst-case analysis assumes the interest rate charged on the loan will
reach its maximum allowed limits at each rate adjustment period and over
the life of the loan. If the WORSTCASE
option is used, either the CAPS= option
or the MAXRATE= and MAXADJUST= options must be specified.
The WORSTCASE option can be abbreviated W.

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