Examples of Factored Securities:
- Asset Backed Securities (ABS)
- Corporate Bonds with Sinking Fund Provisions
- Collateralized Mortgage Obligations (CMO)
- Mortgage-Backed Securities (MBS)
- Treasury Inflation Protected Securities (TIPS) issued by the U.S. Treasury
- Linkers – Any type of Inflation Protected Security issued by the U.S. Treasury or other entity
In the context of a bond that adjusts, factor is the number the face value of the bond is multiplied by to calculate the adjusted principal.
For TIPS, this number is also called the Inflation Factor, also known as the Index Ratio. The Inflation Factor is calculated by dividing the latest reference CPI by the Reference CPI on the Dated Date of the bond.
For certain fixed income products that pay principal, like mortgage-backed securities, factor is the number by which the original face value of the product decreases over time. Factor is multiplied by price and quantity and and then divided by 100 to determine the Most Recent Value of the position. Similarly, Factor is also multiplied by Previous Price and Quantity and then divided by 100 to determine the Previous Value of the position.
If applicable, factor is found as part of the Description in factored securities. Note that the value of factor is the most recent value as of the previous day's close. It is not updated intraday.