On an absolute valuation basis, note that:
Tranches trading at a premium (discount) will see gains (losses) when the assumed prepayment rate decreases.
Increases (decreases) in assumed interest rate volatility increases (decreases) the option cost and reduces (increases) the value of the MBS (which is short the prepayment option).
I understand the 2nd point vaguely but i don`t understand point 1 .
Can somebody explain both the points in depth ?
http://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/91319567
Recall from your Level I (and Level II) derivatives: increased volatility of the price of the underlying increases the value of options (both puts and calls) because it makes it more likely that the option will be in the money (or further in the money); decreased volatility of the underlying reduces the value of options.
Think of an MBS as a combination of a long option-free bond and a short prepayment option. As the value of the option increases (increased interest rate volatility), the value of the MBS decreases (it’s short the option); as the value of the option decreases (decreased interest rate volatility), the valur of the MBS increases (it’s still short the option).
I understood the 2nd point the same way but anyways THANKS for point 1.
You explain really well 
My pleasure.
You’re too kind.