Assignment of Trade (AOT)

  

In general, the term "assignment of trade" refers to a process where someone in a forward contract (meaning a deal that is set to take place at some point in a future) makes a separate side deal with to assign their part of the agreement to a third party. Remember the game of telephone as a kid? You know, the one where you whisper something to the person next to you and they repeat what they heard to the person next to them and on down the line until "I like your shoes" becomes "Eye lines in York are a snooze."
Assignment of trade is basically the transactional equivalent of telephone (only hopefully nothing gets degraded along the way - you're just passing the deal along to the next person).
The term has its most notable relevance in the market for mortgage-backed securities. An MBS is a tradable asset similar to bonds that derive their income from revenue from home loans. Some mortgage-backed securities are traded on what is called the "to be announced," or TBA, market. This sounds like something a bad business school student would make up after forgetting to do their homework, but it's a real thing in the MBS world.
Individual mortgages differ in a lot of ways. The size or quality of the home, the location, the credit histories of the people who own the house, etc. In the TBA market, companies take pains to make sure the mortgages are as similar as possible, to the extent that they are virtually interchangeable.
Because of this, the exact nature of a particular mortgage becomes irrelevant - any particular mortgage within a certain type is as good as another. Thus, companies trade in the market without having to know specifics of the mortgage pool they are trading - the details are literally TBA.
In this context, companies are able to move pretty fast and can use the assignment of trade technique. By making a deal and immediately assigning the assets to a third party, a company seeks to fine-tune the timing of the transaction. This way, the firm can maximize its return while minimizing its risk. When using this strategy, the company at the center of the trade doesn't want to hold the MBS for any length of time. Instead, it creates a situation where it moves the securities onto a third party, lowering its risk and optimizing its return.

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Finance: What is a Merchant Account?4 Views

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Finance allah shmoop What is a merchant account All right

00:07

You sell earrings at the mall hearings for years and

00:10

you know other regions private ones You're a merchant You

00:14

take credit cards visa amex mastercard A customer pays for

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her ear ring with a visa card charge for three

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hundred bucks Alright Well where does that money go How

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does it get there Well because you pierce on earth

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have a merchant account you take her little mag strip

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thing Me on her card with all our information has

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everything on it like her name bank number address phone

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a whole bunch of other codes on it You swipe

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it in your little reader and voila Three hundred boxes

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taken from her account with visa taking about five bucks

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of this transaction for the pleasure or pain of doing

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it And then visa room it's two hundred ninety five

00:55

dollars into your bank of america merchant account that's How

01:00

you got paid So who gets a merchant account Do

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you need a fundamental genetic resistance teo Kryptonite to be

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granted such lofty status No not at all Generally speaking

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all you need is a few grand in a basic

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bank account Reasonable credit scores like above six hundred ish

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And you have to be willing to fork over some

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minimum initial amount as well as minimum monthly amount So

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it's still worth it for the credit card companies and

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banks to continue to be in business with you like

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there's A basic monthly fee for most of them Well

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how do you lose your merchant account status Well you

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offer lousy product to your customers who demand their money

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back through charge cards in what's called a charged back

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like they dispute the charge and make the credit card

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company go after you for the refund And that then

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violates some minimum few percent floor from a credit card

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taking perspective and well then visa mastercard amex will They

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could just stop issuing you a credit taken stopped taking

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customers cards from you and then you have to only

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take cash You're screwed But as long as you follow

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the rules pay your bills and continue to attract creative

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people who want piercings in you know interesting places like

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the mall Then you'll remain in business for a long

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as you want more or less and well so that's

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It You're one of the few the proud the merchants

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