Planned Amortization Class (PAC)

A type of CMO tranche that uses support tranches to absorb the risk of prepayment, if actual prepayment does not conform with anticipated levels. If actual prepayments for the mortgage pool are within a specified range, the PAC tranche will experience its originally computed return. If actual prepayments are less than or greater than the range allows, investors are subject to extension and contraction risk.

Updated on: 24/04/2023