Investors retain prepayment risk on MBBs, but issuers incur this risk with MPTs.

Name: Investors retain prepayment risk on MBBs, but issuers incur this risk with MPTs.
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Question

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In Mortgage-Backed Bonds (MBBs), investors do not retain prepayment risk; it is the issuers who manage this risk. Conversely, in Mortgage Pass-Through Securities (MPTs), investors do bear the prepayment risk as they receive the cash flows from the underlying mortgages directly.

Investors Retain Prepayment Risk on MBBs, but Issuers Incur This