Portfolio has MBS position - interest rate risk

Interest rate going down : Contigent claim risk

How about rising interest rate? Will slower prepayment reduce portfolio cash flow?


Thanks. In short, as long as interest rate is not flat, the MBS’s position will have interest rate risk.

As it is for every other bond…?!

For other bonds, interest rate down is positve. (Asset only)

But focusing on the liability side… :slight_smile: So, it depends on the case!