Hard call protection is a type of call protection that limits the issuer's ability to call the bond before its maturity date. Hard call protection typically applies to bonds that are issued with a put option, which gives the holder the right to sell the bond back to the issuer at a predetermined price. If the bond is called, the holder will receive the call price, which is usually higher than the price at which the bond was originally issued.
What is call protection in CMBS?
Call protection is a feature of some commercial mortgage-backed securities (CMBS) that limits the ability of the issuer to call the security prior to maturity. Call protection typically lasts for a certain number of years, after which the issuer may call the security at its discretion. Call protection may be offered as an incentive for investors to purchase CMBS, as it provides a measure of stability and predictability with respect to the security's cash flow.
What is the difference between ABS and MBS?
ABS stands for asset-backed security. An ABS is a type of financial security that is backed by a pool of assets. The assets can be anything from loans to credit card receivables to leases. ABS are typically issued by financial institutions and are used to raise capital.
MBS stands for mortgage-backed security. An MBS is a type of financial security that is backed by a pool of mortgages. MBS are typically issued by government-sponsored enterprises (GSEs) and are used to raise capital for the housing market. Does CMBS have prepayment risk? Yes, CMBS have prepayment risk. This is the risk that the borrower will prepay the loan before the maturity date, which will result in the loss of interest income for the lender. What is a hard call protection? A hard call protection is a type of bond protection that limits the issuer's ability to call the bond before its maturity date. This type of protection is typically found on bonds with long-term maturities, such as 30-year bonds.
What is structural call protection?
Structural call protection is a type of call option in which the exercise price is significantly higher than the underlying asset's price at the time the option is purchased. This makes it very unlikely that the option will be exercised, but it provides significant downside protection in the event that the underlying asset's price declines.