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Derivatives




MOTO


It stands for mortgage over treasury option, which is, by definition, a cash-settled call that is written on the mortgage over treasury spread, i.e., the spread between a specific mortgage backed security (or index yield) and the yield of a particular treasury security.

Among the key factors on which the option value is based is the mortgage repayment rates which, in turn, are affected by the general level of interest rates.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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