This paper examines the securitization of financial products that have both assets and liabilities, and that are affected by longevity risk. The longevity risk is what determines the magnitude of the assets and that of the liabilities embedded in the financial product to be securitized. Examples...

Purpose – The aim of this paper is to develop the optimal delta hedge for a portfolio of mortgage servicing rights (MSR) under the constraint of a zero-gamma in order to avoid costs related to the rebalancing of such portfolio. Design/methodology/approach – The paper develops the optimal...

Purpose – The aim of this paper is to develop the optimal delta hedge for a portfolio of mortgage servicing rights (MSR) under the constraint of a zero-gamma in order to avoid costs related to the rebalancing of such portfolio. Design/methodology/approach – The paper develops the optimal...

Ortiz et al. [2008, 2009] develop models for portfolios of mortgage servicing rights (MSR) to be delta-hedged against interest rate risk. Their models rely on this fundamental relationship between prepayment rates (cpr) and interest rates, represented as a sigmoid function (S-shape). Defaults...