Irrational call option - definition of Irrational call option - what does Irrational call option mean? What is Irrational call option?

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What is Irrational Call Option?

Definition of Irrational Call Option

The implied call imbedded in a MBS. Irrational because the call is sometimes not exercised when it is in the money (interest rates are below the threshold to refinance), and sometimes exercised when it is not in the money. Option exercise like this affects payments on the MBS.