Research On The Pricing Of Mortgage-backed Securities

Benefit from the implementation of the credit assets securitization registration system,Mortgage-Backed Security(MBS)began to explode since 2015.Any financial products cannot develop healthily and continuously without mature pricing mechanism and scientific risk assessment system.MBS is a kind of relatively complicated financial instrument which combines credit business and securities business,the structural reorganization of cash flow and risk makes MBS’s pricing become more complicated.MBS market in China is still at the starting stage and lack mature pricing mechanism.Besides,the financial environment has great difference compared with that of foreign countries.Therefore,exploring the suitable RMBS pricing mechanism for China has significant theoretical as well as practical meaning.Based on the analysis of technical principles of MBS,taking two core factors-cash flow and discount rate of pricing into consideration,combining with China’s actual situation,comparing and analyzing the advantages and disadvantages and applicability of existing pricing methods,this paper presents direct pricing is the best pricing method.Secondly,at asset pool level,this paper makes empirical analysis on prepayment by macro factors and deeply discusses about research results.Thirdly,on the basis of comparing different kinds of term structure of interest rates model,this paper proposes to use Hermite’s Interpolation model to build spot rate curves.Last,this paper uses parameter fitting method to simulate the spreads,makes comparative analysis by different prepayment ratio,and finally draws some important conclusions.Empirical research shows that it is not enough to predict the Prepayment behavior from the asset pool level,individual characteristics should also be taken into consideration.Pricing results show that the lower the level of securities under the same prepayment rate,the higher the order of the risk of cash flow,the greater the coupon spread;at the same level of securities,with the increase in the prepayment rate,the coupon spreads gradually widened,but the rate of spread widening is declining;in the pricing process,the investors not only taking into account the risk of default and prepayment risk,but also consider other risks,such as liquidity risk,complexity risk,transaction structure risk,et al.With the secondary market of RMBS continues to develop,the risk premium will gradually decrease.