nannan66

My further questions :
1. 2nd paragraph under “b, Duration Hedge versus Two-Bond Hedge” on P179.
... if the yield curve shift is a "level one"

What does it mean by "level one" here ?

2. 1st paragraph under "C. Prepayment Risk" on P171
... Termed negative convexity, this effect can be significant --- particularly for mortgage securities that concentrate prepayment risk such as "interest-only strips".

What does this mean ? Does this has to do with with the Exhibit 4/5 and those relevant statements on P170/171 ?'

3. 1st paragraph on P181
This implies that the two-bond hedge for the Fannie Mae 5% has a duration of 4.98. This is about 9% less than the duration of 5.5 for the Fannie Mae 5%.

What is the meaning (implication) of a two-bond "hedged" Fannie Mae 5% with a duration of 4.98 versus its original duration of 5.5 ?

4. The question posted by cfacareerchanger (as above)

Sorry, I have so many questions but any advice will be much appreciated.