SHOP

The principal only cash flows of a mortgage pass-through.

The current value of a sum of money that is to be received at some later date.

Usually referred to in the ABS and MBS markets, this is the risk that borrowers prepay their loan early. In the mortgage market, homeowners will prepay their mortgage when interest rates decline. As rates decline, the MBS investor will receive their principal back sooner than expected and will have to…

When the price of a security is above par (100.00), the bond is said to be trading at a premium and when it is trading below par it is trading at a discount.

The market for raising capital by issuing securities, debt or equity, either to the general investing public or to a special class of investors.

A power reverse dual currency note (PRDN) or power reverse dual currency bond (PRDB) is an exotic financial structured product where an investor is seeking a better return and a borrower a lower rate by taking advantage of the interest rate differential between two countries. The power component of the…

Assets will move in the same direction. Benefits of diversification are limited when assets are positively correlated.

Convexity is defined as the property of a financial instrument that dictates the amount by which its value changes with changes in market rates. For example, a straight bond is said to have positive convexity if its price rises by an amount p1 when yields fall, and its price falls…

Also called booking a swap. The taking of a position in a swap by a swap dealer. This contrasts with a broker in which the swap facilitator acts as an agent in a swap and does not take the swap on its own books.

The risk and return characteristics of all possible combinations of two assets in a portfolio plotted on a risk-return graph to sketch out a curve whose shape depends on the correlation of the assets.

The weighted average duration of a bond portfolio. The modified duration of each bond is multiplied by the market value weight of that bond to the entire portfolio; this product is then summed over all the bonds in the portfolio to get the portfolio duration. This is a measure of…

A set of investments made by an investor in assets such as stocks, bonds, money market instruments, mutual funds, precious metals, real estate etc. with different risk/return characteristics and maturities. A well structured portfolio offers an investor the benefit of diversification which an individual security, asset class or investment sector…