| China's housing mortgage loan business began in 1998, after the rapid development in 2000, resident individuals purchase loans rose sharply in 2009 and 2010 have been reached 4.895579 trillion yuan, respectively, and 6.549684 trillion yuan, an increase of the balance of 32.65% and 25.19%. At present, China mainly mortgages are variable rate loans, the interest rate change will affect the borrower's borrowing costs. Interest rates increase the borrower's interest costs, the rational borrower may choose to repay them early. Since 2004, the first rate hike after rate hike more and more frequently, until the peak in 2007, and from the second half of 2010, the central bank raised its benchmark interest rate four times. Because of interest rate control has been implemented, making long-term interest rate of commercial banks did not attract enough attention to risk, especially for the early withdrawal of deposits and loans in the prepayment behavior and caused long-term credit risk and interest rate risks ignored. This will give commercial banks operating in China brings great risks. The loans of commercial banks in China among mortgage possession of a large proportion, so the mortgage prepayment behavior is present, we need to pay attention to the problem.In this paper, mortgage prepayment behavior of the implicit option pricing caused by the main line for the study. In the interest rate market conditions, in-depth study of housing mortgage loans in the embedded option and risk factors, and using the Monte Carlo simulation in-depth discussion of such complex interest rate derivatives pricing.First, the paper outlines the concept of mortgage and classification; analysis of mortgage prepayment status and factors affecting impact of mortgage prepayment of the factors, and compared the difference between domestic and prepayment; discussed Prepayment of Commercial Banks.Secondly, this paper analyzes the investment behavior of the borrower to proceed on the implicit mortgage options in the nature, characteristics and depth of the implementation of the border, and draw such options based on interest rate changes implied American option point of view.Finally, the nature of embedded options based on the analysis, this paper the characteristics of China's current interest rate market analysis to estimate a more appropriate interest rate jump-diffusion model parameters;also studied Monte Carlo Simulation of Embedded Options pricing model and theory, combined with bank loans of the type of embedded options and investors the best execution strategy theory, decades of China's commercial banks to repay the loan in advance of the implied option pricing.Reading through the literature, coupled with theoretical research and empirical expanded simulation, this paper can draw the following conclusions: first, the incidence of prepayment, although the pros and cons, but overall, more harm than good. In China, the income and interest rates are the main factors affect the prepayment, so as to promote the gradual marketization of interest rates, commercial bank deposit and lending interest rate implicit in the option risk has become an interest rate risk can not be ignored; Secondly, CIR model, we add jumps to better fit the Government's macro-control or market interest rates caused by mutations in other jump conditions can be more accurately changes in interest rates; Finally, Monte Carlo simulation techniques, mortgage The embedded option is an exact pricing, the results show that:China's commercial banks have ignored the existence of hidden value of the option, if the implied premium of which were collected, the commercial banks can greatly reduce the risk of capital mobility to reduce its capital exposure. By 10-year mortgage option value implied:0.0029, ie, interest rates should be based on the loan, together with the corresponding option values, it is more conservative and reasonable rates. |
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