give price changes due to these yield curve movement types. For instance, suppose we know the amount by which the yield curve has steepened at each key rate maturity. Then the return of the MBS due to a steepening Treasury curve is given by Other risk factors MBS have many more risk factors than are used for vanilla bonds, and an attribution scheme needs to model them all. They include option-adjusted spread, or the extra yield demanded by the security holder to compensate for the mortgage repayment option; current-coupon spread volatilities convexity cost of carry While all these factors can be important in accounting for changes in MBS returns, in practice a particular user may only select a subset. The reason is that a perturbational analysis requires the provision of risk sensitivity numbers for each factor, and in some cases these may simply not be available. The return made by such uncomputed risks may be grouped into an ‘Other’ category in the attribution report. Benchmarks The importance of benchmarks remains widely underestimated. To perform attribution on a portfolio, one must also run attribution on its associated benchmark, and this frequently presents substantial difficulties. To provide attribution information at the same level of detail for a benchmark, one needs extensive, detailed weights and returns, and these are often hard to find. For instance, many widely used benchmarks contain thousands of bonds. Deriving the security-level returns of an industry benchmark so that the overall returns match the published figures remains a major challenge for most practitioners. While benchmarks may have much greater uniformity of instrument type than managed portfolios, the sheer number of securities – and the data maintenance issues required to reprice each one, and to ensure that the correct coupon amount and timing is used when a coupon is paid – means that detailed benchmark modeling remains extremely difficult. There are also issues involving transparency of benchmark calculations, with many of the underlying actions remaining obscure. Even pricing data can be difficult to come by in some cases. For some Asian benchmarks, illiquid markets can mean that accurate yield data is not published at all, which can make calculation of risks very difficult. Future challenges The sheer variety of the fixed-income markets, and the pace of innovation in this area, means that provision of an attribution capability from scratch will continue to present significant challenges. In no particular order, issues