Public Securities Association (PSA)

What Is Public Securities Association?

Public Securities Association (PSA) was a trade organization for traders dealing in U.S. government securities.

Grasping Public Securities Association (PSA)

Public Securities Association (PSA) was the ancestor association to the Bond Market Association, which addresses the largest securities markets in the world, the bond markets. The Public Securities Association was incorporated in 1976 and went through a name change to the Bond Market Association in 1997 to better mirror its expanded electorate and membership.

The Bond Market Association addressed a different mix of securities firms and banks, from large firms to niche subject matter experts, with 70 percent of member firms having their headquarters outside of New York City. Its members by and large represented a huge majority of U.S. municipal bond underwriting and trading.

In November 2006, the Bond Market Association combined with the Securities Industry Association. The two organizations consolidated to form what then turned into the Securities Industry and Financial Markets Association or SIFMA. SIFMA's current membership addresses 75% of the U.S. broker-dealer sector by revenue and remembers in excess of 13,000 experts for the finance and banking industries. SIFMA is a major trade association that addresses securities brokerage firms, investment banking institutions, and other investment firms.

PSA standard prepayment model

Public Securities Association no longer exists as an official organization, however its legacy perseveres as a financial model that conveys its name. The Public Securities Association Standard Prepayment Model is a system used to compute and manage prepayment risk. It depends on the assumption that prepayment trends will change during the life of a loan or other obligation, and these varieties will, thusly, influence the yield of the security. This is a benchmark scale developed by the PSA in 1985 as a manner to evaluate prepayment risks.

Traders consider prepayment speeds for mortgage-backed securities while assessing the security's possible yield and risks. The standard benchmark for measuring prepayment speeds is the consistent prepayment rate model. This accepts the prepayment rate will stay fixed and reliable over the life of the contract. Nonetheless, the tracking of trends obviously shows that this generally isn't the case. Borrowers regularly make no major acclimations to the loan inside the initial not many years, nor does the average homeowner move or sell their property during that time. Notwithstanding, over time, the chances of paying off the loan early increase. The PSA Standard Prepayment Model changes the expected prepayment speed contingent upon the age of the loan.