MBS volatility risk 2010, decide, about, rates

pawn

What kind of options you use to hedge it? Interest rate options?
But how do you decide about strike rates?

Thanks,



Edited 1 time(s). Last edit at Saturday, May 29, 2010 at 12:17AM by Vegas.

Iginla2011

I dont think techniques on how to hedge it was ever part of the curriculum. Something so specific would probably have a special derivative established for it, similar to how you can buy/sell the VIX. Certainly wouldn't try to force fit any generic tool. Maybe there is a gamma hedge that you can use.