Pricing Method Analysis Of MBS Based On Prepayment

Mortgage Backed Security(MBS) refers to the issuing of portfolios of illiquid mortgage assets by financial institutions.With future cash flows as a guarantee, the combination can be sold in the financial market and circulated among investors. The business has played a positive role in increasing the liquidity of credit assets, improving the structure of assets and liabilities, and promoting the redistribution of social resources.MBS not only has the risk characteristics of ordinary fixed income securities, but also increases the risk of cash flow brought by the prepayment behavior. Prepayment risk is the main risk faced by MBS and reasonable pricing is indispensable to the successful issuance and circulation of MBS. The value of MBS is no longer the stable cash flow discount.This causes difficulty to pricing.This paper analyzes related research in field of home and abroad, discusses special factors of prepayment risk impacting on cash flow, combinates different MBS pricing methods with the practical situation of our country, and puts forward suitable pricing method at present stage.