Drop

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Dictionary Says

Definition of 'Drop'

The difference in price between the front month and back month in a mortgage-backed security (MBS) dollar roll trade. A dollar roll is a popular type of trade in the MBS pass-through TBA market. 

According to forward securities pricing theory, the front month price should be higher than the back month price. The drop is a function of current short-term interest rates, prepayment estimates, and the supply and demand for pass-throughs in the current delivery or front month.
Investopedia Says

Investopedia explains 'Drop'

A pass-through TBA security is said to be trading through fail when the drop is larger than what it would cost a mortgage originator, investor or securities dealer to fail to deliver into a TBA contract for an entire month. When there is a shortage of supply or extreme demand for a TBA security in the current delivery month, the drop can increase to fail or larger, reflecting the fact that securities dealers would rather roll a trade out an additional month at a large drop or fail to deliver that security for an entire month than make delivery in the current month.
Search results for

'Drop'

  • When Stock Prices Drop, Where's The Money?

    http://www.investopedia.com/articles/basics/03/060603.asp
    When Stock Prices Drop, Where's The Money? February 26 2009 | Filed Under »
    Economics, Investing Basics, Venture Capital. Have you ...

  • Short Squeeze The Last Drop Of Profit From Market Moves

    http://www.investopedia.com/articles/stocks/08/short-squeeze-profits.asp
    Short Squeeze The Last Drop Of Profit From Market Moves. December 08 2008 |
    Filed Under » Short Selling, Stocks. When stock prices ...

  • Mining Amicability Amid A Drop In Demand

    http://stocks.investopedia.com/stock-analysis/2009/Mining-Amicability-Amid-A-Drop-In-Demand-X-RTP-BHP0326.aspx
    ... Mining Amicability Amid A Drop In Demand. Posted: Mar 26 ... year basis. In Japan,
    the drop was more severe, down 44% year-over-year. (For ...

  • Government Report Shows Drop In Natural Gas Production

    http://stocks.investopedia.com/stock-analysis/2009/Government-Report-Shows-Drop-In-Natural-Gas-Production-GDP-SM-DVN-XCO1207.aspx
    ... Government Report Shows Drop In Natural Gas Production. ... Has the long-predicted
    and anticipated drop in production finally arrived? ...

  • FDA To Obesity Drugs: Drop Dead

    http://stocks.investopedia.com/stock-analysis/2010/FDA-To-Obesity-Drugs-Drop-Dead-ARNA-VVUS-OREX-PFE0920.aspx
    ... Article; Comments (0). FDA To Obesity Drugs: Drop Dead. Posted:
    Sep 20, 2010 10:56 AM by Stephen D. Simpson, CFA. ...

  • Tertiary Recovery Squeezes Out Every Drop

    http://stocks.investopedia.com/stock-analysis/2009/Tertiary-Recovery-Squeezes-Out-Every-Drop-SD-DNR-OXY-APC1014.aspx
    ... Article; Comments (0). Tertiary Recovery Squeezes Out Every
    Drop. Posted: Oct 14, 2009 11:34 AM by Eric Fox. ...

  • Natural Gas PUDs Drop Like Flies

    http://stocks.investopedia.com/stock-analysis/2011/Natural-Gas-PUDs-Drop-Like-Flies-VQ-NFX-CNX-CHK0210.aspx
    ... Article; Comments (0). Natural Gas PUDs Drop Like Flies.
    Posted: Feb 10, 2011 10:22 AM by Eric Fox. ...

  • E&P Operators Drop Natural Gas PUD's

    http://stocks.investopedia.com/stock-analysis/2012/EP-Operators-Drop-Natural-Gas-PUDs-NBL-RRC-CNX-PXP0223.aspx
    ... Article; Comments (0). E&P Operators Drop Natural Gas PUD's.
    Posted: Feb 23, 2012 09:06 AM by Eric Fox. ...

  • JPMorgan's Drop In Book Value An Invitation To Investors?

    http://stocks.investopedia.com/stock-analysis/2009/JPMorgans-Drop-In-Book-Value-An-Invitation-To-Investors-JPM0120.aspx
    ... Article; Comments (0). JPMorgan's Drop In Book Value An Invitation To Investors?
    Posted: Jan 20, 2009 14:44 PM by Ryan C. Fuhrmann , CFA. ...

  • Do I still have to pay penalties and taxes on money that I don't ...

    http://www.investopedia.com/ask/answers/195.asp
    ... Do I still have to pay penalties and taxes on money that I don't roll over
    from a DROP fund? It depends. Let's address the two penalties ...

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