Drop(Real Property) Law and Legal Definition
In real property, the term “drop” means the difference in price between the front month and back month in a mortgage-backed security (MBS) dollar roll trade. A dollar roll is a popular type of trade in the MBS pass-through TBA market. The front month price should be higher than the back month price, according to forward securities pricing theory. The drop is a function of current short-term interest rates, prepayment estimates, and the supply and demand for pass-throughs in the current delivery or front month. The drop can increase to fail or larger, reflecting the fact that securities dealers would rather roll a trade out an additional month at a large drop or fail to deliver that security for an entire month than make delivery in the current month, when there is a shortage of supply or extreme demand for a TBA security in the current delivery month.
Legal Definition list
- Drop(Real Property)
- Drop-Shipment Delivery
- Drop-Down Clause
- Drop-Dead Provision
- Drop-Add Period [Educational Assistance Programs]
- Dropsy Testimony
- Dru Sjodin National Sex Offender Public Website
- Drug Abuse
- Drug Abuse Education and Prevention Services
- Drug Abuse Prevention and Control
- Drug Abuse Prevention, Treatment, And Rehabilitation Act
