The Risk And Pricing Research Of Mortgage-Baked Secruritization In China

Mortgage-backed Securitization (MBS), born in America, is a hot point into international financial innovation within the recent several decades and an entrance into the development of residential finance in China. It has extended the traditional credit chain, increased the liquidity of commercial banks, and provided a new way of raising funds for real estate market, so both real estate market and financial market can benefit from MBS. But longer credit chain contains more risk factors, complex process of securitization increases the uncertainty of income. Whether MBS increases the systematic risk to national economy is partly decided by whether the risk from MBS can be correctly priced. So when we focus on the benefit of MBS, risk and pricing study is more important.According to China's national conditions, this paper based on the basic concept of MBS, analyzed the risk hide in China's MBS, especially the prepayment risk. Chinese borrowers' prepayment features are different from foreign borrowers', therefore measuring China's prepayment risk should not imitate foreign models. This paper analyzes the factors of China's prepayment by using the Grey relational theory, including general economic conditions,interest rate,population and other factors, through analysis, finding the factors of income level, interest rate is the direct reason for China's prepayment.Mortgage-backed Securities are bonds with options, so its theoretical price is different from the ordinary bonds. This paper analyzes a price of MBS and pricing model of MBS, and then proposes our MBS pricing method , finally using the Monte Carlo simulation to simulated interest rate and adopted OAS model to do a pricing simulation of China's MBS.