Planned Amortization Class (PAC) Tranche

外汇网2021-06-19 14:09:59 51

A class of tranche in a planned amortization class (PAC) bond that receives a primary payment schedule. As long as the actual ppayment rate is between a designated range of ppayment speeds, the life of the PAC tranche will remain relatively stable. This tranche of the PAC bond receives some measure of protection against ppayment risk.

|||The measure of ppayment risk protection, which includes both contraction and extension risk, is limited by the size of the companion bond and the speed of ppayment. If the speed of repayment is too slow (below the lower PAC collar), the life of the PAC tranche is extended; if the speed of repayment is too fast (above of the upper PAC collar), the life of the PAC tranche is shortened.

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