Housing Mortgage-backed Securities Pricing Issues

The securitisation of home mortgage will be put out soon in our country as a new financial product, and it will enable the huge, poor-liquidity funds to be effectively used, thus to improve the strength that the banks within our border resist financial risks. But one of the emphases for mortgage - backed securities (MBS) to be exchanged is to price them appropriately.By the way of quantitative and qualitative analysis, this paper presents some pricing models suitable to our country s MBS, and then makes some advice for the securitisation of the home mortgage of our country from perspective of pricing. Chapter one of this paper presents the basic concept of MBS and its characteristics. Emphatically, chapter two makes the pricing analysis of MBS, including the research on the prepayment behavior in the home mortgage, and analyzing the suitable terms, merits and shortcomings of pricing model in the presence of endogenous, actual prepayment. Chapter three analyses the suitable pricing model of our country's MBS, and by studying secular trend and fluctuation of risk free interest rate and the term structure of interest rate of national debt, I propose an option model based on floating interest rate MBS which will be issued in our country. Next, cash flow current value method is used to carry out the empirical test. Chapter four puts forward the policy suggestion in terms of problems perplexing the pricing of our country's MBS.