Dealer-Median Prepayment Speed
The median value of all Wall Street securities dealers’ prepayment speed estimates for the underlying mortgages used to form mortgage-backed securities. The prepayment speed estimates used by banks and other regulated financial enterprises to value and manage mortgage-backed security portfolios are a concern to regulators. To that end, dealer-median speeds are widely used as conservative estimates. Investopedia Says:
The dealer-median prepayment speed is an important consideration, as it is the median measure of how fast mortgage borrowers will prepay their mortgages. Prepayment speed estimates are also a very important variable in mortgage-backed securities valuation and analysis. Investors and traders compete to develop more accurate proprietary models in order to outperform each other in the broader market. Related Terms:
Collateralized Mortgage Obligation - CMO
Conditional Prepayment Rate - CPR
Mortgage-Backed Security - MBS
Planned Amortization Class (PAC) Tranche
Prepayment
Public Securities Association Standard Prepayment Model - PSA |