Irrational call option

Definition:

The implied call imbedded in a MBS. Irrational because the call is sometimes not exercised when it is in the money (interest rates are below the threshold to refinance), and sometimes exercised when it is not in the money. Option exercise like this affects payments on the MBS.

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Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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Document required by the U.S. Department of Commerce for exports of certain controlled items, and/or shipments to certain countries, and/or shipments anywhere that exceed certain dollar amounts. This... Read More

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