series of quiz- mbs buying, investment, mortgage, principal, potential

LBriscoe

1. when should a portfolio manager manage the vol risk by buying options, when should he hedge dynamically?
2. mbs are market-directional investment that should be avoided when one expect interest rates to __________.
3. true or false: when managed properly, mortage securities are not market-directional investments.
4. five principal risks of mortgage securities:
5. After hedgin the IR risk of a mortgage security, the portfolio manager has the potential to earn the treasury bill rates plus _____.
6. two important factors in explaning changes in yield curve are changes in the _____ and _______.
7. true or false: the addition to a two-bond hedge of an appropriate number of interest rate options enables a portfolio manager to offset SOME or ALL of the negative convexity of a cuspy-coupon mortgage security.
8. how to calculation the duration of an option.