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Derivatives

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  • November 10, 2020
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Mortgage Prepayment Floor

An OTC option (floor) that provides the holder, usually a mortgage company, with protection from a potential loss in return if the prepayment rate in a specific mortgage pool falls below a preset strike level relative to a published prepayment rate. In comparison with prepayment caps, prepayment floors are usually uncommon.

A mortgage prepayment floor is the opposite of a mortgage prepayment cap.


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