There are many factors impacting makret price of MBS. overtime, will it tend to derease because of amortization considering just Agency MBS.

ceteris paribus risk should come down given amortisation

Thanks daveangel! you meant given other things the same, amortization will cause market value of MBS decrease?

QuoteOriginally posted by: PerpetualThanks daveangel! you meant given other things the same, amortization will cause market value of MBS decrease?errrm when i read your question I thought you were asking about risk.sorry - are you comparing two bonds one with amortisation and one without ? In which case I think the price of the amortising bond should be higher.

I don't think the question was well posed to begin with, and this is reflected in the subsequent discussion. It may be worth trying again, being a bit more precise.

This was indeed a poorly phrased question. Maybe they are referring to the pull-to-par effect as a bond approaches maturity, all other things equal? Amortization reduces duration so maybe this is what they mean. But pull-to-par can come from above par or below par, so maybe not.There have been a number of poorly phrased questions on the forums lately....

Sorry. Not on purpose. It is from my lacking of related knowledge. Let me try to clarify my question.Say we have perfect models on the MBS (prepayment, default, interest rate model). We could discount the cash flows to get the NPV. Say we have two time stamps t1<t2. The NPV calculated at t1 will be less than the NPV calculated at t2, right? since loan life at t1 is longer than t2 and will receive more cash flows.David, would you please explain in plain language on the pull to par and from above par and below par? Thanks so much and sorry for my ill phrased questions.