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The excess spread is the difference between the interest rate received on the underlying collateral and the coupon on the issued security. It is typically one of the first defenses against loss. Even if some of the underlying loan payments are late or default, the coupon payment can still be made.
If some of the mortgage loans go delinquent or default, funds from the excess spread account can be used to pay the bondholders. Excess spread is a very effective mechanism for protecting bondholders from defaults that occur late in the life of the deal because by that time the funds in the excess spread account will be sufficient to cover ...
For example, if you have $3,000 in a margin account, you could leverage a total of $6,000 to buy marginable stock. Some brokerage firms will offer more buying power, but it depends on the firm and ...
For an MBS, the word "option" in option-adjusted spread relates primarily to the right of property owners, whose mortgages back the security, to prepay the mortgage amount. Since mortgage borrowers will tend to exercise this right when it is favourable for them and unfavourable for the bond-holder, buying an MBS implicitly involves selling an ...
Opening accounts with different ownership categories, such as joint accounts or trusts, can also increase FDIC insurance coverage. Other options for insuring excess deposits include brokerage ...
Fixed-income arbitrage is a group of market-neutral-investment strategies that are designed to take advantage of differences in interest rates between varying fixed-income securities or contracts (Jefferson, 2007).
A Credit valuation adjustment (CVA), [a] in financial mathematics, is an "adjustment" to a derivative's price, as charged by a bank to a counterparty to compensate it for taking on the credit risk of that counterparty during the life of the transaction.
In finance, a spread trade (also known as a relative value trade) is the simultaneous purchase of one security and sale of a related security, called legs, as a unit.Spread trades are usually executed with options or futures contracts as the legs, but other securities are sometimes used.