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Speed

• Related: prepayment speed

 
 Embedded terms in definition
 Prepayment speed
Prepayment
 
 Referenced Terms
 Collar: Is the combination of a long Cap position and a short Floor position. It is sometimes called a range forward or a fence. Generally, it is structured so that the net cost of the collar is zero or close to zero. This means that the debit expense for the long cap premium is offset by the credit received for the short floor premium. This term is also used to define the prepayment Speed range for a credit instrument.An upper and lower limit on the interest rate on a floating-rate note.A Collar also refers to a combination of cap (call option on interest rates) and floor (put option on interest rates). An investor who holds a collar is in effect protected from interest rate increases or interest rate declines.Buy a call and sell a put. If a firm buys jet fuel and wants protection against jet fuel increases, it can buy a call option with a higher exercise price than the current price and sell a put option (with lower exercise price than the current price) and limit the price fluctuations to be in between the exercise price of the call and the exercise price of the put.

 Informational efficiency: The Speed and accuracy with which prices reflect new information.

 Inventory turnover: Measures the activity, or liquidity, of a firm's inventory.The ratio of annual sales to average inventory which measures the Speed that inventory is produced and sold. Low turnover is an unhealthy sign, indicating excess stocks and/or poor sales.This ratio shows how many times the units of inventory of a company are sold and replaced during an accounting period. The convention' is to divide sales by the inventory. However, it is more realistic to divide the cost of goods sold by inventory.

 Lag response of prepayments: There is typically a lag of about three months between the time the weighted average coupon of an MBS pool has crossed the threshold for refinancing and an acceleration in prepayment Speed is observed.

 Linter's observations: John Lintner's work (1956) suggested that dividend policy is related to a target level of dividends and the Speed of adjustment of change in dividends.

 
 Related Terms
 Prepayment speed

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