Pricing Credit Default On Mortgage-backed-security With Markov Regime Switching

In western mature financial markets,asset securitization products have a huge market scale.Presently in our country,asset securitization products are also developing rapidly.The default risk of asset securitization products and corresponding pricing of credit derivatives based on asset securitization products have been a hot research topic in modern credit risk theory.The main work of this paper is pricing the default risk on mortgage-backed-security.This paper adopts the Markov regime switching jump-diffusion model of Common Shock,by modeling the joint survival probability of loans and the distribution of default loans,we can calculate the present value of the loss of default and the premium payments when investors buy credit-default-swap contracts to transfer default risk.Then we can write out the closed formula of the rate of premium payment.Finally,this paper makes numerical calculation with the closed formula and presents numerical results to show the usability of pricing model.