Mortgage Pricing Model, Incomplete Information

In recent years, the real estate industry develops rapidly in our country, individual home mortgage loans have been expanding, it has played an important proportion of the amount of bank loans, so banks face some different kinds of credit risks. If borrowers default or repay the loans early, banks will face risks, to reduce the risks we research pricing models of mortgage derivative assets under incomplete information.Information of the realistic market is incomplete, it includes subjective incomplete information and objective incomplete information, this paper's incomplete information refers to the latter. The research work of this paper mainly has two points, first, in incomplete realistic market, banks can get income by searching information, we suppose there is not any arbitrage opportunity in the market, then obtain the home mortgage loan default option pricing model under incomplete information by reasoning. We analyze the model's boundary conditions, get its numerical solution with the MATLAB software, and study how the house price, the information income of house price ,the option information income distinctively influence the mortgage loan default option's value. Second, similarly , in incomplete market, on basis of house price equation of motion and CIR interest rate model, we obtain the home mortgage loan contract pricing model under incomplete information, analyze its boundary conditions, get its numerical solution through the MATLAB software, and study how the house price, the interest rate variance, the house price variance, the length of maturity, the information income of house price, the information income of contract distinctively influence the mortgage loan contract's value. Banks can reference the conclusions in this paper, and fix much fair price of home mortgage loan under incomplete information, which can reduce the risks that happen because borrowers default or repay the loans early.Individual home mortgage loan market started lately in our country, so now we don't have established perfect risk circumvention mechanisms, to push home mortgage loan market develop well and quickly, we need speed up the development of home mortgage loan derivation property, and also strengthen the credit management, perfect the pawn handling system, consummate the home mortgage loan laws and regulations and so on.