Business and Personal Finance Dictionary

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• FLUX
  
  A measure of the sensitivity of CMO cash flows to changes in the prepayment rate of the underlying MBS collateral. Derived from flow uncertainty index. Developed by the National Association of Insurance Commissioners to create a standard measure of CMO volatility. A flux score is a composite of two elements that indicate the impact of six prepayment scenarios on a bond’s present value and on the timing of its cash flows. That impact is expressed in terms of variation from a base case. Flux scores are calculated once each year in January. A flux score of 0 indicates no cash flow uncertainty. (Rather than a lack of interest rate risk, this score indicates that the amount and timing of the cash flows are known.) There is no upper limit for flux scores.
  
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