Why is Macaulay duration an inadequate measure of interest rate risk for an MBS? Why is effective

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Why is Macaulay duration an inadequate measure of interest rate risk for an MBS? Why is effective duration a better measure of interest rate risk for an MBS?

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Fundamentals of Investments Valuation and Management

ISBN: 978-0077283292

5th edition

Authors: Bradford D. Jordan, Thomas W. Miller

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Question Posted: Sep 19, 2012 05:12 AM

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Why is Macaulay duration an inadequate measure of interest rate risk for an MBS? Why is effective

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Macaulay duration assumes fixed cash flows With MBSs and CMOs the payments depend on prepayments ...View the full answer

Fundamentals of Investments Valuation and Management

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