Strategy lab
Every strategy from 151 Trading Strategies and all 101 Formulaic Alphas as formulas you can edit and backtest on ten years of daily stocks, ETFs, futures, forex and crypto data. Free, in your browser.
11.7Structured assetsReference
Mortgage-backed security trading
Buy MBS pass-throughs and hedge their duration with swaps, earning the spread for bearing prepayment risk (negative convexity).
Why there is no chart
MBS prices, prepayment models and swap rates.
The lab runs on daily prices for stocks, ETFs, indexes, futures, currencies, crypto and Treasury yields. This strategy from 151 Trading Strategies depends on data outside that set, so it is explained and formalised here rather than backtested.
Hypothetical backtests on daily closes with no slippage unless you add costs. Survivorship bias applies: the stock list is today’s large caps. For learning, not investment advice. Data: Yahoo Finance via yfinance.
- Source
- 151 Trading Strategies
- Section
- 11.7 · Structured assets
- Asset class
- Structured credit
- In the lab
- Explained, not backtested
Mortgage-backed security trading (11.7)
Buy MBS pass-throughs and hedge their duration with swaps, earning the spread for bearing prepayment risk (negative convexity).
Data it needs
MBS prices, prepayment models and swap rates.
More in Structured assets
- 11.2 Carry, equity tranche – index hedging
- 11.3 Carry, senior/mezzanine – index hedging
- 11.4 Carry – tranche hedging
- 11.5 Carry – CDS hedging
- 11.6 CDOs – curve trades
Source: Kakushadze, Z. and Serur, J. A. (2018). 151 Trading Strategies. Palgrave Macmillan. SSRN 3247865. Summaries are our own.