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by snake_doc
1506 days ago
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Yes, absolutely right no argument there. Intuitively, prepayment risk can be broken down into interest rate risk and default risk in its most basic terms when compared to a coupon bond. The risk relates to duration and cash flows. Early prepayments decrease duration, and decrease expected cash flows, which can be thought of in relation to interest rate risk and default risk. I guess I prefer when complex topics are broken down back to their principal parts. |
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