The Study Of The Pricing And Design Of Chinese Mortgage Backed Securities

Mortgage Backed Security emerged in 1970s in America. Now it has become one of the most important financial innovations and the most popular fixed income products in America. It is significant to the financial market and the global economic development. But due to some restrictions, MBS is new to China. On Dec 15^th 2005, the successful issuing of "2005-1 MBS" by China Construction Bank marked the development of MBS in China was triggered. However, because the domestic investors are not familiar with the MBS, the pricing of the MBS seems very difficult for them. The liquidity of the MBS is not very well in China. Therefore, with the hope to do some good to the development of the MBS in China, the paper is aimed at making some research on the pricing theory, risk management strategy and designing method of the MBS.Firstly, the paper reviews the research on the MBS. Then the paper investigates the interest term structure model, prepayment model and the credit risk model. At the same time it compares three pricing methods of the MBS. Secondly, according to the matter of fact in China, the paper designs a prepayment model for the Chinese MBS. In the empirical part, the paper prices the "2005-1 MBS" with the prepayment model, and finds that it is deeply overvalued. Thirdly, the paper focuses on the risk management of the MBS. It makes some research on how to measure the risks of the MBS and how to control them. Finally, the paper makes some research on how to design the MBS. We compare the cost and the benefit of the issuing of the MBS, and introduce its framework and the procedure. At last, we give some useful advice to the choice of the mortgaged assets and the Design of the product.To sum up, the paper is a full and systematic research on the pricing, risk management and product Design of Chinese mortgaged backed securities, including the theoretical analysis, empirical study and useful suggestions.