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Financial Risk Manager Part 1

Financial Risk Manager Part 1

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A hedge fund's market risk team is tasked with developing stress test scenarios aimed at assessing the impact of changes in different market variables on the fund's holdings of agency-backed mortgage-backed securities (MBS). The team seeks to identify factors that might trigger an increase in the prepayment rate for these MBS holdings. Given that all other factors are kept constant, which of the following is most likely to result in an increased rate of prepayments within the portfolio?

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