Illya Gerasymchuk profile photo
Illya Gerasymchuk
Financial & Software Engineer

the duration formula for MBS assumes for some pre-payments

User Illya Gerasymchuk -

2025-08-02 17:33

the duration formula for MBS assumes for some pre-payments

if those happen at a smaller rate - the duration increases

User

raising yields means lower incentives to re-finance mortgages which reduces the amount of pre-payments

thus, the duration increases when yields are raising - so even a higher price decrease