Risk Control Effect Of Index-linked Mortgage And Its Application In China

Along with booming scale of China real estate market, home price is also soaring into the air year by year, continuously breaking the historical record in recent. Property market bubble gradually appears up, symbolly refer to high uncertainty of house price. Conventional house mortgage is becoming passive confronting with the current situation of growing risk in real estate market.Index-linked mortgages, as thoroughly creative property derivatives, overthrow traditional solely pegged-to-interest rate mechanism and largely take into account about price element of underlying property. Inserting put option linked with underlying property price index into conventional mortgage loan could relief mortgage borrowers' scruple to price vacillation in maximization, mostly covering their home price fluctuating risk exposure. The derivative transactions are required to be developed and become widespread as one of the methods to respond to risk hedge and transfer.Property derivative markets in developed economies are still on the way, many theoretical studies in this newfangled academic field, nevertheless, have been conducted. Amid such circumstance, importing overseas leading-edge study fruits of property derivative market would pave a profound fundament in theory for development of China property derivative market.In the thesis, firstly, analyzes operation mechanism of index-linked mortgages, and introduces relevant economic theories supplying adequate theoretical support. Secondly, the author makes a value analysis and comparison between index-linked mortgages and conventional housing mortgages by using mathematical model, and, meanwhile, highlights risk control effect of index-linked mortgages. Further, based upon canvass of potential risk undermined in China housing mortgage market, the paper analyzes interior demands of both financial institutions and borrowers for index-linked mortgages. Finally, based on foreign property derivative development track and current position of China financial market, the author puts forward several worthful suggestions for the usage of index-linked mortgages and development of property derivative market in China.