What is a Mortgage-Backed Security

Hi Rade,

Does this make sense?

Mortgage backed securities are those securities which have been backed by certain assets and they are believed to have a better level of safety due to backing of assets but they do have problems like:

A. Interest rate fluctuations are one of the major fluctuations which will be impacting the mortgage backed securities because they are offering lower coupon.

B. Reinvestment risk as well as prepayment risk are other types of risks which are based on payment of securities before the maturity and they are associated with mortgage backed assets.

C. There are other ways like risks of negative convexity of bonds in mortgage backed securities.

D. There are also risk associated with risk related to extension of these mortgage-backed securities.

There are the risk associated with mortgage backed securities and they are moreover similar to that of the risk faced by the treasury bonds as well as corporate bonds but there will be additional two types of unique ways such as the prepayment risk and the investment risk along with extension risk which are faced by mortgage backed securities.