A phenomenon that arises when a planned amortization class (PAC) schedule is not met even if prepayments on the collateral always remain within the speed band over time. This is due to the fact that the band that guarantees the original PAC schedule can narrow and expand, depending on actual prepayments. In essence, the PAC band should guarantee that if prepayments occur at any single constant speed with the band and remain there, the PAC schedule will be met.
January 5, 2025
