Answer :
Derivative securities include, for instance, mortgage-backed securities. A credit facility whose value is based on the value of some other asset is referred to as a derivative security.
How do mortgage-backed securities operate and what are they?
Mortgage-backed securities (MBSs), a subset of asset-backed securities, are created by combining just mortgages. A mortgage-backed securities is effectively a loan to homebuyers from the investor who purchases it. A broker can be used to purchase and sell MBS.
How dangerous are securities backed by mortgages?
MBSs often provide yields that are greater than those of U.S. Treasurys, they also have hazards. Reinvestment risks, prepayment risks, and also the risk of negative convexity are a few of these. Because they are secured and backed by low-risk debt, MBS have the benefit for inherent security.
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