The Research On Mortgage Securitization In China

Mortgage-Backed Securities (MBS) is a mainstream product of Asset-Backed Securities. MBS has been one of the key investment products for institutional investors. However, due to the imperfection of national financial market, domestic research on MBS mainly focused on the comparative analysis of issuance arrangement of securities and transaction design. Therefore the research on the pricing of MBS becomes a vital topic in China and this dissertation will try to make some research on the pricing and investment analysis of MBS.Firstly, this dissertation analyses the basic theories and technologies of MBS which mainly include the market parties, operation procedures and risks. The empirical study of the dissertation shows the difference of prepayment risk between China and other countries is due to the floating rate mortgage loan and the lack of re-finance of mortgage loan. It is the specialty of prepayment increase when interest rate rises in China that has an important impact on the pricing of MBS. This dissertation reaches the conclusion that the planned amortization classes are the most suitable MBS to the present financial market in China as well.This dissertation also makes the comparative analysis and summarizes the main reasons which lead to the successful operation of asset securitization in foreign countries. By mainly analyzing the operation pattern of securitization in USA, this dissertation finds out that the maturity of secondary mortgage market promote the development of asset securitization. This dissertation also offers some suggestions to the future operation of asset securitization in China.The key part of dissertation is the pricing of MBS. This dissertation suggests taking the seasoning effect of prepayment into account regarding to the specialty of prepayment in China and utilizes the Monte Carlo simulation and term structure of interest rate to price the prepayment option by option adjusted spread innovatively. The empirical study of option adjusted spread shows the volatility of prepayment ratio will affect the price of MBS greatly.This dissertation makes research on the risk management of interest rate as well. This dissertation innovatively calculates the option adjusted duration and option adjusted convexity for the first time in China. This dissertation also analyses the investment concerns and strategies, and suggests utilizing the option adjusted duration to build up investment portfolios which are immune to the interest volatility.