..., maturity) of bonds that when combined with MSR create a portfolio that is dynamically hedged against interest rate risk and prepayment risk, and therefore eliminates the need of periodic rebalancing of a portfolio of MSR, which is costly. Hedging Mortgage companies Risk Management Interest rates...

... Mortgage companies Services Of course, the divergence in expected PSA is much narrower for positive shifts in the yield curve. For example, for an increase of 300 bps, Lehman Brothers expected a 170 PSA, while UBS expected a 161 PSA. That is because as market rates increase, prepayment decreases...