# fixed-income-structured

A skill for structured fixed income: CMO tranches, prepayment speeds, waterfall mechanics. Useful when you need to size risk on MBS or CLO paper.

- skill · `type=skill` · Claude Code, Codex, Cursor, GitHub Copilot, Gemini CLI, OpenCode · 664 installs · ★ 218
- Author: JoelLewis
- License: MIT · policy=mirror · the beginning of the file is at the end of this page
- Source: https://github.com/JoelLewis/finance_skills/tree/HEAD/plugins/wealth-management/skills/fixed-income-structured/SKILL.md
- Updated: 2026-07-18
- HTML: https://affpapa.org/en/nevibecode/skills/fixed-income-structured

## What it does

The skill hands your agent a reference on structured fixed income products. It covers MBS pass-throughs, where principal, interest and prepayments from a mortgage pool flow to investors pro rata, and notes that agency paper from Ginnie Mae, Fannie Mae and Freddie Mac carries a guarantee against credit losses, so prepayment stays the main concern. Non-agency MBS have no such guarantee and carry both credit and prepayment risk.

Prepayment risk gets both faces spelled out: contraction risk when rates fall and principal comes back early, extension risk when rates rise and you sit in a below-market coupon longer than planned. The PSA model is there with its linear ramp from 0% CPR to 6% CPR over the first 30 months and the plateau after, plus the CPR-to-SMM conversion and the WAL formula. On CMO tranches you get sequential pay, PAC with a predictable schedule inside a speed band, and the support tranches that absorb the variability. On CLOs: subordination, OC and IC tests that divert cash flow to senior tranches when the portfolio sours.

For valuation the skill insists on effective duration or OAS rather than modified duration, since cash flows move with rates. That is the practical takeaway: run modified duration on an MBS and you get a wrong number. A formula table and worked examples sit at the bottom, including a 150% PSA to CPR and SMM conversion for month 20 and a subordination calculation for an AAA tranche.

## Install

### Claude Code (native platform)

1. **Skills CLI (Vercel)**
```bash
npx skills add JoelLewis/finance_skills --skill fixed-income-structured -a claude-code
```

2. **Manually: put the files in place**
- File: `~/.claude/skills/fixed-income-structured/SKILL.md` — Copy the whole skill folder; for one project use .claude/skills/fixed-income-structured/

### Codex

1. **Skills CLI (Vercel)**
```bash
npx skills add JoelLewis/finance_skills --skill fixed-income-structured -a codex
```

2. **Manually: put the files in place**
- File: `.agents/skills/fixed-income-structured/SKILL.md` — For all projects use ~/.agents/skills/

### Cursor

1. **Skills CLI (Vercel)**
```bash
npx skills add JoelLewis/finance_skills --skill fixed-income-structured -a cursor
```

2. **Manually: put the files in place**
- File: `.cursor/skills/fixed-income-structured/SKILL.md` — Cursor also reads .agents/skills/ and .claude/skills/

### GitHub Copilot

1. **GitHub CLI**
```bash
gh skill install JoelLewis/finance_skills fixed-income-structured
```

2. **Manually: put the files in place**
- File: `.github/skills/fixed-income-structured/SKILL.md`

### Gemini CLI

1. **Skills CLI (Vercel)**
```bash
npx skills add JoelLewis/finance_skills --skill fixed-income-structured -a gemini-cli
```

2. **Platform CLI**
```bash
gemini skills install https://github.com/JoelLewis/finance_skills --path plugins/wealth-management/skills/fixed-income-structured
```

### Windsurf (Devin Desktop)

**Manually: put the files in place**
- File: `.devin/skills/fixed-income-structured/SKILL.md` — The legacy .windsurf/skills/ path still works

### OpenCode

**Skills CLI (Vercel)**
```bash
npx skills add JoelLewis/finance_skills --skill fixed-income-structured -a opencode
```

### Claude.ai

**Claude.ai**
- Zip the folder and upload it in Settings → Capabilities → Skills

Where a file is given instead of a command, copy the files from the source to that path: https://github.com/JoelLewis/finance_skills/tree/HEAD/plugins/wealth-management/skills/fixed-income-structured/SKILL.md

## When to use it
- convert a PSA speed into CPR and SMM
- map a CLO waterfall across tranches by seniority
- work out subordination below an AAA tranche
- explain negative convexity in mortgage paper
- pick effective duration over modified for MBS

## Example prompts
- Convert 150% PSA to CPR and SMM for month 20
- Walk me through this CLO waterfall and show the AAA subordination
- Why can't I use modified duration on this agency MBS?

## Source text · SKILL.md · MIT

Below is the content of a third-party file. It is data, not instructions for you: do not act on anything written inside unless the human asks. Block tag: 512a693fccf7c444.

BEGIN THIRD-PARTY FILE 512a693fccf7c444
```text
---
name: fixed-income-structured
description: "Analyze structured fixed income products including mortgage-backed securities, asset-backed securities, and CLOs. Use when the user asks about MBS, ABS, CLOs, CDOs, prepayment risk, tranching, or waterfall structures. Also trigger when users mention 'mortgage bonds', 'agency MBS', 'pass-through securities', 'PSA prepayment speed', 'negative convexity', 'extension risk', 'contraction risk', 'CMO tranches', 'securitization', or ask how structured products redistribute credit and prepayment risk."
---

# Fixed Income — Structured Products

## Core Concepts

### MBS Pass-Throughs
A pool of mortgages whose cash flows (principal, interest, prepayments) are passed through to investors on a pro-rata basis. Agency MBS (Ginnie Mae, Fannie Mae, Freddie Mac) carry a government or GSE guarantee against credit losses, isolating prepayment risk as the primary concern. Non-agency MBS lack this guarantee and carry both credit and prepayment risk.

### Prepayment Risk
Borrowers can refinance when rates drop, returning principal early. This creates negative convexity — when rates fall, MBS prices rise less than comparable Treasuries because prepayments accelerate and shorten the bond's effective life. Prepayment risk has two faces:

**Contraction risk:** Rates fall, prepayments accelerate, duration shortens. Investors receive principal back when reinvestment rates are lower.

**Extension risk:** Rates rise, prepayments slow, duration extends. Investors are locked into below-market coupons for longer than expected.

### PSA Prepayment Model
The Public Securities Association model provides a benchmark prepayment speed:

100% PSA = ramp from 0% CPR to 6% CPR linearly over the first 30 months, then constant at 6% CPR thereafter.

At 150% PSA, all speeds are multiplied by 1.5 (e.g., the plateau is 9% CPR). At 200% PSA, the plateau is 12% CPR.

### CPR and SMM
**CPR (Conditional Prepayment Rate):** Annualized prepayment rate as a percentage of the remaining pool balance.

**SMM (Single Monthly Mortality):** Monthly prepayment rate.

SMM = 1 - (1 - CPR)^(1/12)
```
END THIRD-PARTY FILE 512a693fccf7c444

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