PAC tranche - Definition

Planned Amortization Class (PAC) Tranche is a bond that receives a primary payment schedule. PAC tranches use a mechanism similar to a 'sinking fund' to establish a fixed Principal payment schedule that directs cash-flow irregularities caused by faster- or slower-than-expected prepayments away from the PAC tranche and toward another companion or Support tranche (see below). With a PAC tranche, the Yield, average life, and lockout periods estimated at the time of Investment are more likely to remain stable over the life of the security. The measure of prepayment Risk protection, which includes both contraction and extension risk, is limited by the size of the companion bond and the speed of prepayment.



Terms near "PAC tranche"

Pac-man
Pacific Exchange
Pacific Rim
Pacific Stock Exchange
Package Deal
Package loan
Package mortgage
Package policy
Paid up
Paid-in capital
Ready to Trade!
First you'll need an online broker. See how much you can save by visiting Forexbite Broker Center.
Advertisement

PAC tranche - Related articles & news

Featured
Top 5 factors that affect exchange rates ...

There are many factors that affect exchange rates of currencies. However some are more important in currency trading than others. These are; Interest and Inflation rates, Trade balance, Currency market speculation, Foreign investment and Central bank market intervention. Learn how to use these factors in your forex tra ...

Forex Navigation