So This is relative to the “cash flow risk” part.
it has us identifying where cash flwo risk comes from. I sais in the Mortgage backed sector, ther eis lower prepayment risk in the rising rate environment because fewer people would be paying off mortgages in a risign rate envorninment, hence a positive effect. They are saying that it worsens their problem becasue peopel count on prepayment as part of their cash flows.
Is this an “either way is bad” type situation or am I forgetting some fundamental concept of mortgage backed’s?