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Mortgage-backed security

Mortgage-backed security Definition

A mortgage-backed security (MBS) is a bond whose cash flows are backed by homeowners' mortgage payments. The nuance which makes an MBS more interesting than the average bond is uncertainty in the cash flow timing. Since homeowners may repay their entire mortgage at any time (called prepayment) an investor can not be certain of the timing of the cash flows.

RELATED TERMS
Option adjusted spread
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Prepayment
RELATED CATEGORIES
Real Estate




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