The Pricing Study Of The Mortgage-backed Security

The mortgage-backed security is a kind of interest rate derivative security, which is come into being from the mortgage securitization. The mortgage securitization belongs to the category of the Asset Securitization. It will be an outset of our country's asset securitization. So, the study of the MBS pricing is very importantly at the present time. This paper start with analyzing the innovate principle and cash flow of the MBS, use the native and overseas MBS pricing model for reference, and bring forward a new MBS pricing model based on the two fork tree options pricing method.The first chapter is the introduction. It introduces the background and the sense of this paper, and research production of the MBS pricing in our country and the foreign country. The MBS came into being at the U.S.A in the 1960's. In 1990's, the fifty percent of the mortgage loan balance in the U.S.A was securitiesed. After that, the MBS was developing in the entire world. A lot of west countries, Japan, the southeast of Asia and Hong Kong all set up and developed this new format of the house finance. Based on the developing experience of the mortgage securitization in foreign countries, developing the mortgage securitization in our country is very necessarily. And Reasonable pricing of the MBS is the key in the operation of the mortgage's securitization.The MBS is a kind of derivative securities, produced at the process of the mortgage securitization. Its procreant principle and mechanism are the mortgage securitization. The mortgage securitization is a process of finance. The mortgage assets, which are short of fluidity but have cash flow-in in future, was combined, passed of structure re-combination, and was translated of the securities that can sale at the money market. The second chapter describes the process of the mortgage securitization, analyzes the operating mechanism of it, and explains the innovate theory of the MBS.The third chapter is cash flow analysis of the MBS pricing study. The mortgage loan is the matrix of the MBS. After the cash flow produced by the mortgage loan deducted the interrelated service charge, it will translate into the cash flow of the MBS. That directly impacts the pricing of the MBS. At present, the mortgage loans in our country has three modes: the once payment mortgage, the constant payment mortgage and the constant amortization mortgage. The risk of pre-payment is the mostly important risk in the mortgage loans. The pre-payment of the borrowers will change the anticipative cash flow. So, the risk of pre-payment is the key of the MBS pricing study.The operating tools of the MBS are the Mortgage Pass-through Security, the Collateralized Mortgage Obligations and the Stripped Mortgage-backed Security. The third chapter analysis the cash flow of those operating tools in detail.The fourth chapter introduces the existent MBS pricing models. The MBS is a kind of the derivative security that comprising an Option. Its pricing is based on the pricing theory of the ordinary bonds, but differentiates of the ordinary bonds. Based on the Black and Scholes's Option pricing theory, it has the differential equation the derivative security mast be according with. But it is obviously, the differential equation that the MBS pricing mast be according with, is difficult to have instructional sense. Now, it has three pricing modes of the MBS: the method of establishing a pre-payment model, the method of the option-adjusted spread and the method of the option pricing.A MBS pricing model based on two-fork tree is established in the fifth chapter. A lot of scholars have attempted to establish the MBS pricing model based on the two-fork tree. The essential idea is constructing a two-fork tree chart according to the discount rate. Using this technique, it takes the market discount rate into account but the market mortgage rate. This is based on that if the market mortgage rate fluctuates the discount rate fluctuates too. But whatever happens, the market mortgage rate is difference to the discount rate. It is the mark...