Chapter 23 Structured Products KT Flashcards
The type of risk where the mortgage owners pay back their mortgage debt early, thereby shortening the life of an MBS.
prepayment risk
Bonds that claim ownership to a portion of the cash flows from a group or pool of mortgages, also known as mortgage pass-through securities.
mortgage-backed security
A security created to divide the investment attributes of an underlying portfolio of common shares into separate components that satisfy different investment objectives.
split shares
A passive investment vehicle financially engineered to provide a specific risk and return characteristic through tracking the returns of a reference security.
structured product
A bank-issued debt security where the principal is guaranteed and the return is linked to an equity index or basket of stocks.
principal-protected notes
A type of PPN with proceeds invested mostly in a zero-coupon bond that has the same maturity as the PPN.
zero-coupon bond plus option structure
The risk that the issuer will be unable to refinance or renew the underlying assets when an asset-backed security matures.
roll-over risk
What GIC combines the guarantee of the principal invested with some of the growth potential of an underlying market?
market-linked guaranteed investment certificates
An issue of securities divided into multiple classes, each with its own level of credit risk and either a fixed or variable rate of return.
tranches
The component of split shares that receives most of the capital gains from the underlying common shares.
capital shares
The name of an entity set up to purchase and manage assets as part of an asset-backed security issue.
special purpose vehicles
Bonds that claim ownership to a portion of the cash flows from a group or pool of mortgages, also known as mortgage-backed securities.
mortgage pass-through securities
