Hi David,
Need your guidance with regards to the below question from the end of GARPs Market Risk book.
Consider IO/PO strips based on original pass through MBS whose effective duration is 5 years. If the PO tranche has an effective duration of 20 years, what would most likely be the effective...
As per the definition "Duration is the average time one has to wait till the payment is received". Going by this if, say, duration is 2.5 years means I would receive my money in ~2.5 years. Well.
But, as you may be aware, there are some securities IO strips and FRNs, which are said to exhibit...
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