The to-be-announced (TBA) mortgage security of any issue for the current delivery month that is trading closest to, but not exceeding par value. TBA mortgage securities with the current coupon are used as a benchmark throughout the industry to price and value mortgages. |||For example, TBA mortgage securities often trade with interest rates in increments of 0.5%. Therefore, assuming par value is 100, if Fannie Mae 8% mortgage securities are trading at 99.5 and Fannie Mae 8.5% mortgage securities are trading at 100.75, Fannie Mae's 8% security would be the current coupon. A principle of mortgage analysis is that the higher a mortgage-backed security's coupon is relative to the current coupon, the more likely that mortgage-backed security is to prepay. Mortgage investors make this relative value analysis in calculating mortgage-backed security yields and valuations.
A trading service consisting of everything in Level 2, plus the ability to enter quotes, execute orders and send information. This service is restricted to NASD member firms that function as registered market makers. Also know as "Level III". Taobiz explains Level 3 This allows you to enter bid/ask quotes as the trades are being executed right in front of you. It's the fastest way to execute a trade.
A security backed by life insurance which is derived by pooling together a number of transferable life insurance policies. Similar to mortgage-backed securities, the life insurance policies are pooled together and then repackaged into bonds to be sold to investors. |||Death bonds provide investors with an unusual instrument that is less affected by standard financial risks. The only risk of holding a death bond lies with the underlying insured person. If the person lives longer than expected, the bond's yield will begin declining. However, because the death bonds are created from an underlying pool of assets, the individual risk associated with one policy is spread out, making the instruments more stable.
A trading service consisting of real-time access to the quotations of individual market makers registered in every Nasdaq listed security, as well as market makers' quotes in OTC Bulletin Board securities. Taobiz explains Level 2 This allows you to watch the trades being executed right in front of you. Also known as Level II.
An order placed with a brokerage to buy or sell a set number of shares at a specified price or better. Limit orders also allow an investor to limit the length of time an order can be outstanding before being canceled. Depending on the direction of the position, limit orders are sometimes referred to more specifically as a buy limit order, or a sell limit order. Watch: How Do Limit Orders Work? Taobiz explains Limit Order Limit orders typically cost more than market orders. Despite this, limit orders are beneficial because when the trade goes through, investors get the specified purchase or sell price. Limit orders are especially useful on a low-volume or highly volatile stock.
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. |||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.
A rule that states that capital gains tax must be paid on a bond if the bond was purchased at a discount to the face value in excess of a quarter point per year between the time of acquisition and maturity. The reason for the capital gains tax is that the bondholder gains on the difference between the price paid and the price received at maturity, which is considered a capital gain. |||To determine whether a bond is subject to this tax, calculate the amount of full years between the discounted bond's purchase date and the maturity date and multiply this by 0.25. Subtract the calculated amount from the bond's par value. If this amount is above the purchase price of the discount bond, the purchased bond is subject to capital gains tax.For example, if you are looking at a 10-year bond with a par value of 100 and five years left until maturity, simply multiply five years by 0.25 to get 1.25. You then subtract the 1.25 from the par value to get the de minis cut off amount, which in this example is 98.75 (100-1.25). If the price of the discount bond you purchased is below 98.78 per 100 of par value you will be subject to capital gains tax under the de minimis tax rule.
A stock index comprised of companies associated with actress Lindsay Lohan. Investors might correlate the popularity of Lohan with increased sales surrounding her related products. Firms involved with Lohan endorsements, advertising or movies are included in the index. Taobiz explains Lindsay Lohan Stock Index Fans may see Lindsay Lohan use a certain product, such as her Mercedes Benz, and rush to purchase one for themselves. The increased demand will usually drive up a company's sales, merely for being associated with Lohan. Companies involved in the index include Disney, who produce many of Lohan's films, Daimler Chrysler and Mattel. As with most celebrity-related terms, buzz words such as this usually have a shorter shelf life and may become irrelevant.
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