This article computes the returns from dynamic hedging of the interest rate and prepayment risks of insured fixed rate mortgages. Changing durations cause dynamic hedges with futures markets. Nonparallel shifts in the yield curve are also investigated. Hedges are found to be risk-reducing, but...

This article computes empirical option costs for fixed rate mortgages and compares them to brokers' forecasts. Estimates of risks for mortgage derivatives such as IOs are also examined and shown to have very substantial errors and very substantial differences in the forecasts by different brokers

This article shows the challenges and complexities of hedging fixed rate mortgages. A survey of forecasts of brokers about the risks of mortgages shows many significant disagreements, especially for mortgage derivatives such as interest only strip securities