The Research Of The Framework For The Measurement Of Housing Mortgage Prepayment Risk With Option Adjusted Duration

With our market development, housing credit has been developed. The debt ratio in some cities is even more than the United States and the level of developed countries. With our market development, housing credit has been developed. Presently, the housing consumption credit is largely superior assets of commercial banks; its ratio in the total loan has been rising, and is the main form of china’s consumption credit. The further increase of financial deflationary stringency leads to increase the phenomenon of prepayment in recent years. Because of the increasing interest rate increased the cost burden of loans, many borrowers choose to make early payments. Even the ratio of prepayment of housing mortgage loan was as high as50%in many commercial banks. The housing mortgage loan prepayments to commercial banks conduct the cash flows with a great deal of uncertainty and upset the normal funds utilization plan, bring the slot of the risks to banks. The prepayment is great bursty and uncertainty, it is difficult to predict the actual law, so the bank hasn’t funds sufficient reasonable planning. To research the measurement of the prepayment risk to mortgage loans to houses of commercial banks is a real meaning and value.This article in the analysis of the option of prepayment to mortgage loans for housing in commercial banks, points out its existence of an option. Under conditions of allowing the advance payment, borrowers have the right according to interest rates and relevant factors to pay the balance of the housing mortgage loan in advance, then Duration and Convexity based on a fixed cash flow is no longer effective to measure the prepayment risk of the housing mortgage loan in commercial banks. This article applied Option Adjusted Spread model to calculate the Option Adjusted Duration of prepayment risk of housing mortgage loans, and built the framework of measurement. The research thinking of the framework, using GMM to estimate the parameters of term structure of interest rate, using the Monte Carlo simulation technology to solve the problem of interest on a path, using PSA advance payment model indicators measure the future cash flows, getting the values of the Option Adjusted Duration. According to the framework, paper simulated a sample of fixed rate mortgage loans for housing and measures the results of the Option Adjusted Duration. At the same time, and compared with the results of adopting the amendment Duration, verified the validity and practicality of the framework.Paper is divided into seven chapters to expand:the first chapter is preface; the second chapter is the personal housing mortgage loan and option adjusted duration and so on associated knowledge; the third chapter is the need for commercial banks to measure the prepayment risk of the housing mortgage loans; the forth chapter is to choose the measurement method for measure the prepayment risk of the housing mortgage loans; the fifth chapter is to build the framework of measure the prepayment risk of the housing mortgage loans; the sixth chapter is to apply the framework; the last chapter is the paper’s conclusion and outlook.