Principal-only (PO)

Definition:

A mortgage-backed security (MBS) whose holder receives only principal cash flows on the underlying mortgage pool. All the principal distribution due from the underlying collateral pool is paid to the registered holder of the stripped MBS on the basis of the current face value of the underlying collateral pool.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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Bear spread

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