P & I Claim Letter
A request by the beneficial owner for payment of principal and interest paid to the registered holder.

Pair Off
1. To offset a position in the GNMA forward market by buying an issue previously sold or selling an issue previously bought. Both buy and sell side must be in the same delivery month and both must be for the same guaranteed coupon.

2. To offset a trade in the match book; to do a repurchase agreement on securities acquired through a reverse repurchase agreement or vice-versa.

Paper
Colloquially, securities of a particular industry or sector. May also refer to commercial paper in money market discussions.

Par
The nominal or face value of a security. See Par Value.

Par Bond
A bond selling at par, in line with prevailing new issue or estimated going yield rates.

Par Cap
A restriction which prohibits the delivery of an issue in the GNMA forward market in satisfaction of a yield maintenance contract if the equivalent price of the security delivered is over par. The only exception is when the issue bought for yield maintenance was at a price over par. In this case, the issue delivered may be at the contracted price or lower.

Par Value
1. The value of a security as expressed on its face value without consideration to any premium or discount. Also signifies the dollar value on which bond interest is figured.

2. A price of 100 percent of face value.

3. The face value assigned by a corporation to common or preferred stock.

4. The principal amount or denomination at which the obligor (issuing corporation) contracts to redeem the bond at maturity. This amount is stated on the face of the bond.

Participating Preferred
A preferred stock entitled to a specific dividend before dividends are paid to common stockholders and which also participates with the common stock in additional corporate earnings distributed as dividends.

Participation Certificate
A security issued by FHLMC representing an undivided interest in a pool of conventional mortgages. Principal and interest payments on the mortgages are passed through to the certificate holders each month. Participation certificates qualify as "loans secured by an interest in real property" and as "qualifying real property loans" with respect to certain thrift institutions.

Partly Paid
In the United Kingdom, the full issue price of a Gilt is often paid in either two or three installments. The initial payment is made upon application and the remaining payment(s) is made within a couple of months.

Pass-Through
A mortgage-backed security for which the payments on the underlying mortgages are passed from the mortgage holder through the servicing agent (who usually keeps a portion as a fee) to the security holder. There are 3 types of pass-through securities:

Straight Pass-Through: the security holder receives principal and interest actually collected by the servicing agent.

Modified Pass-Through: the security holder receives interest due, whether or not it has been collected, and principal as collected.

Fully Modified Pass-Through: The security holder receives principal and interest due, whether or not they have been collected.

Pay Code
"S" indicates transaction has settled.

Pay Down
That portion of a mortgage which is applied toward reduction of the par amount, as opposed to the interest due. Includes all pass-through principal payments.

Pay Up
Included are regular additions to GNMA Graduated-Payment Mortgages principal balances, as well as some CMO's. Treated as the opposite of a pay down where payments are being added to the par.

Paying Agent
The agency, usually a commercial bank, responsible for making principal and interest payments on a security.

Payment Delay
The amount of time that elapses between the time that a pass-through issuer receives payments of principal and interest from the mortgagors and the time that the security holder receives them.

PBW
Philadelphia-Baltimore-Washington Exchange

PC
Participation Certificate

Perfect Hedge
Equal price changes on both sides of a hedged position during a hedge period; an ex post description which results from no basis change.

Periodic Payment
In reference to the calculation of average life for a sinking fund issue, a group of consecutive equal sinking fund payments.

Perpetual
A fixed income security with no maturity date, e.g., British consul or a preferred stock with no sinking fund.

PFD
Preferred

Pick-up
The gain in yield resulting from the sale of one block of bonds and the purchase of another block with a greater yield.

Pit
A trading area on the floor of an exchange where only one kind of security is traded. In futures parlance, it is a trading area on the floor of an exchange where one or more types of futures contracts may be traded.

Point
One percent of the face amount of a bond; $10 for each $1000 face amount. Bond prices are quoted in points and fractions of points.

Pool
A collection of mortgages assembled by an originator or master servicer as the basis for a security. Pools are identified by a number.

Pool Factor
The ratio of the outstanding principal amount of a pass-through pool to its original principal amount.

Pool Insurance
Insurance carried to guarantee the payments of principal and interest on the mortgages comprising a mortgage pool.

Portfolio
The securities owned by an investor.

Portfolio Structure
Refers to the maturity structure of the portfolio. There are three ways to structure a portfolio given a target duration. For example, a portfolio given a target duration of five years would be structured:

Bullet: Focus on intermediate securities (3-7 year maturities).

Barbell: Mix short (1-2 years) and long (10+ years) maturities to achieve a five year average duration.

Blanket: Mix short and long maturities to average a five year duration.

Maturity structure of a portfolio is chosen largely based upon our expectations of the yield curve shifts:

Bullet: Short rates to fall while long rates rise or fall less.

Barbell: Short rates to rise while long rates fall or rise less.

Position
1. To buy or sell a security and thereby become long or short in such security.

2. The amount of a security that one owns (long position) or owes (short position).

PPI
Producer Price Index

Preferred Stock
Securities or shares representing an ownership interest in a business, but which have "preference" over common shares, in regards to dividends and distribution of assets in the event of liquidation.

Premium
The amount by which the price exceeds the par amount or maturity value of a bond.

Premium Bond
A bond selling above par; opposite of a discount bond. The excess over par is called the premium.

Prepayment
The unscheduled partial or complete payment of the principal amount outstanding on a debt obligation before it is due.

Price
The dollar amount to be paid for a security, expressed as a percentage of its current face value.

Price Performance
Determined by changes in interest rates. If rate rise, bond prices fall. If rates fall, bond prices rise.

Prime Rate
1. The rate of interest at which a commercial bank offers to lend money to its most credit worthy customers.

2. The level of prime rates at most money center banks.

Principal
The amount lent at the start of a loan. In the case of fixed income instruments, the principal is the current par value of a security, exclusive of accrued interest.

Principal and Interest Letter
A request by the beneficial owner for payment of principal and interest paid to the registered holder.

Principal Balance
The outstanding balance of a mortgage, sinking fund bond or other debt, exclusive of interest and any other charges.

Principal Only (P/O)
The principal only portion of a stripped mortgage-backed security. For P/O securities, all of the principal distribution is due to the registered holder based on the current face of the underlying mortgage-backed security.

Principal Transaction
A securities transactions in which one or both of the parties act as principals dealing for their own account.

Private Mortgage Insurance
Insurance written by a private company protecting a mortgage lender against loss occasioned by a mortgage default.

Private Placement
A debt instrument which has been negotiated directly between the issuer and investor, without any middleman (brokers).

Process
Event level used in describing the work flow; detailed further by Activities and preceded by Functions. A process is defined by its activities and leads to a change in state.

Producer Price Index
A measure of the prices paid among business firms. It is based mainly on published price lists.

Project Loan
A mortgage on a commercial property or multi-family dwelling, with a maturity of up to forty years. Also used to refer to pass-through pools containing project loans.

Project Notes
A short-term federal tax-exempt note issued by local authorities to build low-cost housing which is backed by the U.S. Government.

Pro-Rata Sinking Fund
A sinking fund in which each investor loses an equal percentage of his holdings to the issuer when the issue is called for sinking fund requirements.

Prospectus
A detailed statement by a company prior to the sale of new additional securities, giving full description of factors and information as required by the Securities and Exchange Commission ("SEC").

Protect
To guarantee a customer an execution at a certain price (the "protect price"). The customer has the option of accepting the execution or refusing it.

PT
Point

Public Housing Authority Bonds (PHA)
Federal tax-exempt bonds which are issued by local housing authorities to finance public housing and are backed by the U.S. Government.

Purchase Fund
A type of bond whose issuer may retire up to specified amounts of the issue in the open market if the price remains below a certain level.

Purchasing Power
Measurement of money value, based on the quantity of goods and services it can buy. Purchasing power of money changes over time and is affected by the rate of inflation. As inflation rises and the costs of goods and services increases, the purchasing power of the dollar declines. If purchasing power is maintained, an investor can keep a constant standard of living.

Put Option
The right to sell a security at a predetermined price on or before a specified future date.

Puttable Bonds
Corporate issues in which the investor has the option to "put" (sell) the bond back to the issue at a stated price.

PX
Price