Vector Path Financial Glossary

What is it? A series of prepayment speeds, in a sequence, that is chosen to reflect an assumed interest rate scenario. For example, if prevailing interest rates are near a cyclical low and still falling, a selected vector path might project a rate path that assumes steady or falling rates in the short run but rising rates for a year or more thereafter. A way of modeling future MBS performance with more complex assumptions than the customary single estimate of future prepayment speed.

Finance Term Definition Added By: Jada

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