Purpose – Interest only strips are created by stripping the interest portion of cash flows generated in mortgage‐backed securities or simply by servicing portfolios of mortgages. A number of financial institutions have significant amounts of mortgage‐servicing rights (MSR) which need to be...

Purpose – The purpose of this paper is to present an innovative model that helps create a portfolio of m‐fixed‐income securities, each with the optimal weight, in order for the portfolio to be δ ‐ and γ ‐hedged against small changes in interest rates. Re‐balancing a portfolio on a...