On the Use of Leveraged-Inverse ETFs to Hedge Risk in Publicly Traded Mortgage Portfolios

摘要: The authors evaluate U.S. Treasury and real estate indexed leveraged-inverse exchanged traded funds (LIETFs), mortgage-based put options, futures as risk hedges in publicly mortgage portfolios under conditions of large rapid interest rate increases. They find that two LIETFs, TBT TTT, to 20+ year T-bonds, were the most effective efficient hedges. TTT performed best. TYO, a LIETF 7–10 T-notes, poorest overall. Liquidity issues limited effectiveness options. Real proved less successful than best LIETFs. advantages include simplicity implementation, loss potential, high liquidity; additionally, tracking error was not problem over lengthy hedge implementation period for conclude potential severe error, when used beyond single trading day, is primary limitation so caution appropriate, frequent monitoring management by skilled traders well-informed portfolio managers are essential.