The Research Of MBS Strength Pricing Method

In this paper, we main research the pricing of housing mortgage. Through checking literature, we found that there is little scholars engaged in quantitative research.There are four pricing methods about the housing mortgage. Include Yield to maturity curve pricing method, The interest rate term structure curve method, Binary tree pricing model and Options to adjust spreads pricing method (OAS). OAS is now generally believed that the method of relatively complete. But the above methods all have their own defects.This article uses the "simplified method" to improve structured method, and evolved into strength pricing method. This method has been proved good for corporate bonds and credit derivatives pricing.The strength pricing method select three main variables:housing prices, default and risk-free discount rate. By the three variables we can establish a pricing model. This article uses the Monte Carlo simulation method.The article also conducted a sensitivity analysis about the variable parameters. Housing mortgage value have positively correlated with lending rates. Mortgage value is relate with the term of loan.