Gone in 60 seconds

The MBS market players have become increasingly sophisticated, especially in proprietary trading and hedge fund operations, wiping out weaker participants. This has lead to the virtual disappearance of the clear arbitrage opportunity. MBS prices reflect relatively efficiently the differences in prepayment propensities of loans with different ages and coupons. Differential pricing of other characteristics such as loan size, geography, purpose, FICO, LTV (loan to value ratio) and property type

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