O'Reilly logo

The Eurodollar Futures and Options Handbook by Galen Burghardt

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

CHAPTER 14Hedging Extension and Compression Risk in Callable Agency Notes

Galen Burghardt and William HoskinsResearch note originally released March 24, 1995

SYNOPSIS

The federal financing agencies have raised well over $150 billion by issuing callable notes, and some of these issues have been large. In January, for example, the Federal National Mortgage Agency (FNMA) issued a $1 billion global bond that was offered to the world at large.

The street’s experience with hedging these issues has been hugely disappointing. Because of the embedded call options, these issues behave like short-term notes when yields are low and falling. But when yields are high and rising, the calls drop out of the money and the notes begin to behave like long-term notes. ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required