Thursday, March 31, 2011

Cash flow yield (CFY)

Cash flow yield (CFY) is one method of valuing mortgage-backed securities.

Cash flow yield (CFY)


description
Advantage
Weakness
  • The CFY is dependent on prepayment assumptions; if prepayment rates differ from the assumption, the CFY will not be realized
  • The assumption that interim cash flows will be reinvested at the CFY. This is rarely true for mortgage-backed securities.
Posted by Unknown at 11:37 PM
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