标题: Another MBS Q [打印本页] 作者: BC_MBA_student 时间: 2011-7-11 19:27 标题: Another MBS Q
Can someone please explain this to me:
A PAC bond with a very narrow PAC window resembles a corporate bond with a bullet payment.
Thanks作者: bolligerallstar 时间: 2011-7-11 19:27
there would only be 1 payment i.e. with a narrow collar, the prepayment speed assumption will only force the trance to make a single payment作者: SeanWest 时间: 2011-7-11 19:27
I just don't get it. So a narrow band means exactly what, the PAC tranche will prob get busted faster? So you are saying once the support tranches are finished trying to maintain the tight band all prepayments will hit the PAC tranche. Also what exactly is the definition is a bond with a bullet payment? Is a Zero Coupon one?作者: mp3bu 时间: 2011-7-11 19:27
Thanks also FYI I found a really good explanation of this:
"The PAC investor is scheduled to receive fixed principal payments (the PAC "schedule") over a predetermined period of time (the PAC "window") through a range of prepayment scenarios (the PAC "band"). The schedule will be met only if the underlying mortgage-related collateral prepays at a constant rate within the range assumed for the structuring of the PAC."
I was confusing the PAC band with the PAC window. ANyway thanks.
