FRM II-MR 20

anbu.edu
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FRM II-MR 20

Postby anbu.edu » Tue Aug 05, 2014 3:40 pm

when the yield is higher than the coupon bond rate of MBS, the MBS behaves similar to corporate bonds as interest rate changes.

Can you please explain this statement..

edupristine
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FRM II-MR 20

Postby edupristine » Thu Aug 07, 2014 10:59 am

Correct because higher yield will reduce prepayment risk and by following this MBS will behave like corporate bond.
loan holders will not prepay when market rate is higher.


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