Mortgage Pipeline Hedging Question

Cici913's picture
Rank: Chimp | 5

Can I possibly get anyone to take a look at this question on mortgage pipeline hedging?I am hedging a $35M mortgage pipeline with a pull-through rate of 75%, hedging with TBA.
What is the $ cost of mishedging if rates go up or down 25 basis points, and pull-through changes adversely by 5% (e.g. from 75% to 70%)
Known: 350k average loan size, 100 loans = $35mm pipeline, assume 4% coupon, we'll hedge to be roughly DV01/duration flat at a 75% coverage ratio; can use public data like MBB etf price, or 10 year yields as a proxy for TBA prices?

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Feb 24, 2020