Question
In the secondary mortgage market, mortgage-backed bonds (MBB) presented a prepayment risk to the issuer. This was resolved by the evolution of Mortgage Pass-Throughs (MPTs).
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In the secondary mortgage market, mortgage-backed bonds (MBB) presented a "prepayment" risk to the issuer. This was resolved by the evolution of Mortgage Pass-Throughs (MPTs). Which of the following statements is true in this context?
The MPT structure eliminated the concept of "prepayment risk"
The resolution of prepayment risk to the issuer was only temporary
The MPT structure merely shifted the prepayment risk to the security investors
The prepayment risk that was eliminated was replaced with default risk of equal magnitude.
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The Economics Of Money Banking And Financial Markets
Authors: Frederic S. Mishkin
9th Edition
0321598903, 978-0321598905
