canadiananalyst

1. Hedge dynamically if implied volatility is high, but expected to drop. If low, but expected to rise hedge with options.
2. An unhedged MBS should be avoided in a falling interest rate environment due to negative convexity.
3. A properly hedged MBS will NOT be market directional, though it is often falsely believed to be.
4.Spread (don't hedge), Interest, Prepayment, Volatility, Model
5. OAS
6. Shape and duration?
7. True
8. Brain fart