SS10 Reading 25 EOC #27 - Clarity on contingent claim risk

CFA Level III
#1

This is really I guess a question on the definition of contingent claim risk. I was under the impression that contingent claim risk was associated with primarily “prepayment” risk (whether a normal mortgage prepayment, a call option or sink provision).

The facts in this case said that the portoflio was all non-callable bonds (no mention of mortgages) so I didn’t think contingent claim risk applied.

Any thoughts?

#2

same question was asked a couple of days ago. Contingent claim is due to the nature of the “liabilities” themselves. If there is a claim, and you do not meet it, there is a contingent claims risk.

It is not because of how those liabilities are being funded (callable/non-callable and all that).