Targeted Amortization Class - TAC

AAA

DEFINITION of 'Targeted Amortization Class - TAC'

A type of credit derivative that is similar to a planned amortization class (PAC) in that it protects investors from prepayment; however, it is structured differently than a PAC. TACs protect investors from a rise in the prepayment rate or a fall in interest rates. They do not protect from a fall in the prepayment rate like PACs.

INVESTOPEDIA EXPLAINS 'Targeted Amortization Class - TAC'

The TAC is essentially a bond under a collateralized mortgage obligation (CMO). Under a TAC, the principal is paid on a predetermined schedule. Any prepayment that occurs is amortized in order to maintain the schedule. TACs are inferior to PACs because they only provide one-sided prepayment protection.

RELATED TERMS
  1. Collateralized Mortgage Obligation ...

    A type of mortgage-backed security in which principal repayments ...
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Companion Tranche

    A class of tranche found in planned amortization class (PAC) ...
  4. Planned Amortization Class (PAC) ...

    A class of tranche in a planned amortization class (PAC) bond ...
  5. Companion Bond

    A class of tranche found in a planned amortization class (PAC) ...
  6. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
Related Articles
  1. Profit From Mortgage Debt With MBS
    Bonds & Fixed Income

    Profit From Mortgage Debt With MBS

  2. Understanding The Mortgage Payment Structure
    Credit & Loans

    Understanding The Mortgage Payment Structure

  3. What is a tranche?
    Investing

    What is a tranche?

  4. How Bitcoin Casinos Work
    Investing Basics

    How Bitcoin Casinos Work

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center