Zero prepayment assumption
The assumption of payment of scheduled principal and interest with no payments. |
Similar financial terms
Zero-coupon bondsThe holder of a zero-coupon bond realizes interest by buying the bond at a discount to its principal value. These bonds made their debut in the U.S. bond market in the early 1980s.
Zero-coupon interest rate
The interest rate that would be earned on a bond that provides no coupons.
Zero-balance account
A zero-balance account (ZBA) is a checking account in which zero balance is maintained by transfers of funds from a master account in an amount only large enough to cover the checks presented.
Zero-base budgeting
The zero-base budgeting (ZBB) method disregards the previous year's budget in setting a new budget, since circumstances may have changed. Each and every expense must be justified in this system.
Zero-beta portfolio
A zero-beta portfolio is constructed to have zero systematic risk, similar to the risk-free asset, that is, having a beta of zero. (i.e. in most cases, we assume the beta of debt to be zero).
Zero-bracket amount
The standard deduction portion of income which is not taxed for taxpayers choosing not to itemize deductions.
Zero-coupon convertible
A zero-coupon bond convertible into the common stock of the issuing company after the stock reaches a certain price, using a put option inherent in the security. It might as well refer to zero-coupon bonds, which are convertible into an interest bearing bond at a certain time before maturity.
Zero-investment portfolio
A zero-investment portfolio consists of zero net value because of a balanced establishment between long and short position, usually in the context of an arbitrage strategy.
Zero-minus tick
Sale that takes place at the same price as the previous sale, but at a lower price than the last different price. Opposite of zero-plus tick.
Zero-plus tick
A zero-plus tick is a common name for listed equity securities whose the current transaction is at the same price as the preceding trade, but higher than the preceding trade at a different price. Antithesis of zero-minus tick.
Zero-sum game
A game wherein one player can only gain at the expense of another player.
Zero-one integer programming
An analytical method that can be used to determine the solution to a capital rationing problem.
Zero Cost Collar
Is a transaction which has little or zero cash outlay or cost for the initiating person. Often, a security is held and some protection is sought via a hedging transaction. One example, would be the purchase of an out-of-the-money put (debit) and the sale of an out-of-the-money call (credit). Here, the premiums for the debit and credit are nearly the same. Therefore, there would be little or no cost for the person seeking the hedge. However, this position places a cap on the potential reward for ...
Prepayments
Payments made in excess of scheduled mortgage principal repayments.
Prepayment speed
Also called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities.
Lag response of prepayments
There is typically a lag of about three months between the time the weighted average coupon of an MBS pool has crossed the threshold for refinancing and an acceleration in prepayment speed is observed.
