How might a savings and loan association use Treasury bond futures to hedge its fixed rate mortgage portfolio (assuming that its main source of funds is short term deposits) Explain how prepayments on mortgages can limit the effectiveness of the hedge ...

It may enact a short hedge in which it sells interest rate futures If interest rates rise its ...

How might a savings and loan association use Treasury bond futures to hedge its fixed-rate mortgage portfolio

Question:

How might a savings and loan association use Treasury bond futures to hedge its fixed-rate mortgage (assuming that its main source of funds is short-term deposits)? Explain how prepayments on mortgages can limit the effectiveness of the hedge.
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...