Question: Explain the problems in valuing mortgage - backed securities . Centralized reporting system that reports the trading of MBS in the secondary market has a

Explain the problems in valuing mortgage

-

backed securities

.

Centralized reporting system that reports the trading of MBS in the secondary market has a time lag, because of which prices in the market of MBS do not reflect the real situation.

Rating agencies do not assign ratings to the MBS

,

therefore, it is difficult to evaluate the risk of investing in MBS

.

The only participants who know the price of MBS that was traded is the buyer and the seller.

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