targeted amortization class (TAC) tranche

targeted amortization class (TAC) tranche
targeted amortization class (TAC) tranche
Bonds created in scheduled-pay CMO structures. A TAC tranche is structured to avoid prepayment volatility. Each TAC has a designated target speed. When prepayments exceed the targeted speed, the excess cash flow is diverted to other tranches in the CMO. Unlike a planned amortization class ( PAC) tranche, a TAC tranche is not protected from extension risk if prepayments are slower than expected. For this reason, TACs can be viewed as half PACs. TACs offer investors protection (but not immunity) from call risk but no protection from extension risk. American Banker Glossary

Financial and business terms. 2012.

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  • targeted amortization class tranche — targeted amortization class (TAC) tranche Bonds created in scheduled pay CMO structures. A TAC tranche is structured to avoid prepayment volatility. Each TAC has a designated target speed. When prepayments exceed the targeted speed, the excess… …   Financial and business terms

  • Targeted Amortization Class bonds — Targeted Amortization Class (TAC) bonds bonds offered as a tranche class of some CMOs , according to a sinking fund schedule. They differ from PAC bonds whose amortization is guaranteed as long as prepayments on the underlying mortgages do not… …   Financial and business terms

  • TAC tranche — targeted amortization class (TAC) tranche Bonds created in scheduled pay CMO structures. A TAC tranche is structured to avoid prepayment volatility. Each TAC has a designated target speed. When prepayments exceed the targeted speed, the excess… …   Financial and business terms

  • TAC bonds — Targeted Amortization Class (TAC) bonds bonds offered as a tranche class of some CMOs , according to a sinking fund schedule. They differ from PAC bonds whose amortization is guaranteed as long as prepayments on the underlying mortgages do not… …   Financial and business terms

  • Companion Tranche — A class of tranche found in planned amortization class (PAC) and targeted amortization class (TAC) collateralized mortgage obligations (CMOs) that absorbs variable prepayment rates. The companion trache is so named because it is designed to… …   Investment dictionary

  • Super PO — A companion tranche structured as a Principal Only (PO) bond, which receives only principal payments from the underlying mortgages. A Super PO is designed to lend support to planned amortization class (PAC) and targeted amortization class (TAC)… …   Investment dictionary

  • Collateralized mortgage obligation — Financial markets Public market Exchange Securities Bond market Fixed income Corporate bond Government bond Municipal bond …   Wikipedia

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