Answer: c) Effective duration

**Answer: C) Effective duration** Implied MBS models are most closely associated with **effective duration** because they reflect how MBS cash flows and prices change when rates change, including the effect of embedded prepayment behavior. Why the others are not as good: - **Macaulay duration** assumes fixed cash flows. - **Modified duration** also assumes fixed cash flows and is less suitable for option-like securities. - **Convexity** is a curvature measure, not the best description of the model itself. Effective duration is the best match because it is designed for instruments with changing cash flows, such as MBS.

Author: Manit Arora