Risk Analysis And Pricing Of Mortgage-backed Securities

With the reform of the housing system, the scale of housing mortgage loan in China expands rapidly. It can be expected soon that Commercial banks will expand Mortgage-backed Securitization in large scales in order to avoid the contradiction between short-term deposit and long-term loan. It should be pointed out that MBS, as a new financial tool, is still on the stage of exploration in China.This paper includes six chapters: the first chapter introduces the background and the sense of the research, the present study at home and abroad, and the research methods and structure of the paper; the second chapter explains the fundamental meaning, principles, operating steps, and the feasibilities of MBS; the third chapter discusses the types and the patterns of MBS; the fourth and fifth are the main parts of the paper, the fourth analyses the particular risk in mortgage-backed securitization such as prepayment risk, credit risk and rate risk etc. Based on the study of the characteristics of the participants in the MBS, this paper puts forward some measures about risk management; the fifth firstly introduces the pricing principles, then predicts the cash flow of the MBS and analyses the return rate of native bond in China, finally fixes a price to the security. At last, the sixth chapter makes a conclusion and look forward to the future development of MBS.The innovation points of this paper are: according to the practice in China, this article analyses the risk in the securitization, and suggests some corresponding measures for risk management. About the pricing, this paper firstly predicts the cash flow of MBS on the basic of analysis of prepayment in China, then chooses the return rate through empirical analysis of China bond plus risk compensation as the discount rate, and prices the security on the basis of spot rate generated by native bond of term structure of interest rates.