Research On The Pricing Of Mortgage-Backed Securities In China

Since the advent of Mortgage-Backed Security (MBS) in1970s, it develops rapidly and has become an important financial derivative product. MBS startted late in China and there only four MBS have been issued. The MBS issued by China Construction Bank in2005is the first one in China, which indicates that China has taken an important step in the development of MBS. In recent years, with the growing residential mortgage loan and the restarting of asset securitization, MBS will certainly gain great development in China.Pricing of the security is an important part of the process of MBS, which is a prerequisite for the successful issue. However, due to the infanct stage of MBS in China, the lack of sophisticated pricing method brings a lot difficulties to China. Therefore, it is significant to research the pricing of MBS.Firstly, based on the basic theories, this paper introduces the development of MBS in China. Secondly, according to the two core parts of princing, this paper analyses the factors of MBS pricing and compares different pricing methods in order to find a suitable method for our country. Thirdly, this paper analyses prepayment and default in an empirical way. Finally, this paper estimates the interest rate spresds of MBS in according to the bond market spreads, and then prices the MBS based on some hypotheses.