The Choice Of Operation Pattern Of The Mortgage Securitization And The Pricing Of The Mortgage-Backed Security

Mortgage securitization is the most important financial innovation during the past thirty years; the research on this topic is always a basic research in finance field. With the introduction of the mortgage securitization of China in 2005, it is very urgent and significant to speed up the research on the mortgage securitization.In this dissertation, firstly the author studies the basic principles of the mortgage securitization, analyses the connotation of the asset securitization and the connections between the asset securitization and mortgage securitization, the main categories of the mortgages and the operation of the mortgage securitization and the merits and flaws of it.Then, the author analyses the main categories and the cash flows of the mortgage backed security (MBS). Two main factors, i.e. the term structure of interest rate model and the prepayment model, which influence the pricing models of the MBS are also researched.Thirdly, the author makes some analysis and comparisons among the operation patterns of U.S, Canada, Hong Kong, England, Germany, and Australia. These patterns are categorized into the out of balance sheet pattern with governmental dominance, the out of balance sheet pattern with commercial dominance, the in balance sheet pattern. On the basis of the analysis, the author finds that the choice of the operation pattern of the mortgage securitization is mainly decided by the ultimate objective and external environments.Fourthly, the author studies the pattern choice and the structure design of the mortgage securitization of China. From the perspectives of the micro economic environment, the market conditions of the mortgage and the institutional environment of the law, China has possessed the basic conditions of mortgage securitization. After the analysis of the merits and flaws of the proposed patterns during past years, the author points out that the in balance sheet pattern can not solve the urgent problem, i.e. the separation of the credit risks of the banking system, the promotion of the competitive abilities of the banking system. It's improper to activate the mortgage securitization with the in balance sheet pattern in China. On the basis of the analysis of the operational pattern of the mortgage securitization of the China Construction Bank, the author points out the three flaws, i.e. the non-introduction of the governmental credit, the absence of the supervision and the high cost of the securitization, and puts forward a securitization pattern with semi-government and semi-market style and proposes that the capital trust should be incorporated with the asset trust in the securitization process. Under this pattern, the process and the main body of the mortgage securitization and the breeds of the MBS are also been designed.At the last part, the author constructs the pricing model of the MBS of China, which incorporated the prepayment model of the borrowers and the Hull-White model. The extended forward induction method is proposed to solve the pricing problems of the pass through, the fixed rate collateral mortgage obligations (CMOs) and the floating rate CMOs. After the empirical study, the author finds that it is proper to use the exogenous prepayment model to forecast the prepayment rate of the borrowers and the endogenetic prepayment model has little ability to explain the prepayment behavior of the Chinese borrowers of the mortgage. The pricing model can not only solve the pricing problems of the pass through, but also the fixed rate CMOs and floating rate CMOs. MBS is a kind of path dependent security; the extended forward induction method proposed in this dissertation can solve the pricing problems of the path dependent security. After the sensitivity analysis of the pricing model, the author finds that the parameters of the prepayment have great impact to the pricing results. As to the term structure model, the parameters have little impact to the pricing results of the higher tranches of the CMO, but have some impact to the lower tranches.In all, this dissertation makes some innovations not only in the theoretical analysis, but also in the empirical part. The findings will have some practical usefulness to the investors and supervisory authority.