A Study On Risk Pricing Of Residential Mortgage-Backed Securitization

Residential mortgage securitization(RMBS)is an innovative financial product,originated in the United States in the 1970 s.RMBS can restructure illiquid residential mortgages in commercial Banks into pools of underlying mortgage assets,which can then become asset-backed securities that can be circulated in the securities market.The launch of RMBS drove the development of our real estate market.RMBS were introduced in Europe in the 1980 s and the European housing market also boomed.Since the 90 s,RMBS were introduced to Asia by Japan and became a global financial innovation product.In December 2005,China construction bank successfully issued the country's first housing mortgage securities-"JianYuan 2005-1" RMBS,creating the history of China's personal housing mortgage securitization.So far,the history of RMBS in China is not long,but China has issued a number of RMBS,among which the most analyzed and studied are " JianYuan 2005-1" RMBS issued by China construction bank in 2005 and 2007 respectively," JianYuan 2007-1" RMBS,and " JianYuan 2014-1" RMBS initiated by China postal savings bank.While obtains the national vigorously promote housing mortgage securitization project,because of RMBS in China started later than other countries,the relative lack of practical experience,in the trading system and pricing has such problems as insufficient risk research and pricing is relatively rough,affect the financing efficiency,lead to actual market circulation quantity is very little,trading is not active,the RMBS securities investors and Banks and money funds as the main body of large institutional investors is given priority to the type is unitary,from individual investors.The main reason is that domestic investors lack understanding of MBS,and it is difficult to accurately predict the risk and future cash flow of MBS due to restrictions,so it is difficult to price RMBS.Therefore,after reviewing relevant literatures at home and abroad,this paper selected the 2017 issue with the largest scale and representative "XingYuan 2017-1rmbs" product as the case to study the risk and pricing of RMBS.At present,the urgent task of vigorously promoting RMBS in China is to divide RMBS into two aspects,analyze RMBS risks and make reasonable pricing on this basis.This paper studies RMBS from two aspects,namely risk analysis and pricing method.Firstly,three kinds of RMBS risks are systematically elaborated: prepayment risk,interest rate risk and default risk.Secondly,this paper introduces the basic pricing theory of RMBS and makes characteristic comparison,analyzes the advantages and disadvantages of each pricing theory,and then constructs a pricing method suitable for China.In this paper,the first phase of personal housing mortgage securities of xingyuan 2017 was selected as the object of study.This case is a large-scale RMBS project recently implemented,which has typical representativeness and research significance.The securities are rated as AAA securities by China chengxin international credit rating co.,ltd.and China debt credit rating co.,LTD.According to the characteristics of the project,the securitization pricing USES static cash flow discount pricing(SCFY),static spread pricing(SS)and monte carlo simulation pricing(MCS)to simulate the pricing of products.Through the comparison of the pricing methods,it is concluded that the monte carlo simulation pricing results have the smallest error,and this paper finally determines that the monte carlo simulation pricing has the rationality and applicability in the current RMBS product pricing in China.Personal mortgage securitization(RMBS)is an innovative financial product,originated in the United States in the 1970 s.RMBS can restructure illiquid residential mortgages in commercial Banks into pools of underlying mortgage assets,which can then become asset-backed securities that can be circulated in the securities market.The launch of RMBS drove the development of the us real estate market.RMBS were introduced in Europe in the 1980 s and the European housing market also boomed.Since the 90 s.RMBS were introduced to Asia by Japan and became a global financial innovation product.In December 2005,China construction bank successfully issued the country's first housing mortgage securities-"Jianyuan 2005-1" RMBS,creating the history of China's personal housing mortgage securitization.So far,the history of RMBS in China is not long,but China has issued a number of RMBS,among which the most analyzed and studied are "Jianyuan 2005-1" RMBS issued by China construction bank in 2005 and 2007 respectively,"Jianyuan 2007-1" RMBS,and "Jianyuan 2014-1" RMBS initiated by China postal savings bank.While obtains the national vigorously promote housing mortgage securitization project,because of RMBS in China started later than other countries,the relative lack of practical experience,in the trading system and pricing has such problems as insufficient risk research and pricing is relatively rough,affect the financing efficiency,lead to actual market circulation quantity is very little,trading is not active,the RMBS securities investors and Banks and money funds as the main body of large institutional investors is given priority to,the type is unitary,from individual investors.The main reason is that domestic investors lack understanding of MBS,and it is difficult to accurately predict the risk and future cash flow of MBS due to restrictions,so it is difficult to price RMBS.Therefore,after reviewing relevant literatures at home and abroad,this paper selected the 2017 issue with the largest scale and representative "xingyuan 2017-1RMBS" product as the case to study the risk and pricing of RMBS.At present,the urgent task of vigorously promoting RMBS in China is to divide RMBS into two aspects,analyze RMBS risks and make reasonable pricing on this basis.This paper studies RMBS from two aspects,namely risk analysis and pricing method.Firstly,three kinds of RMBS risks are systematically elaborated: prepayment risk,interest rate risk and default risk.Secondly,this paper introduces the basic pricing theory of RMBS and makes characteristic comparison,analyzes the advantages and disadvantages of each pricing theory,and then constructs a pricing method suitable for China.In this paper,the first phase of personal housing mortgage securities of xingyuan 2017 was selected as the object of study.This case is a large-scale RMBS project recently implemented,which has typical representativeness and research significance.The securities are rated as AAA securities by China chengxin international credit rating co.,ltd.and China debt credit rating co.,LTD.According to the characteristics of the project,the securitization pricing USES static cash flow discount pricing(SCFY),static spread pricing(SS)and monte carlo simulation pricing(MCS)to simulate the pricing of products.Through the comparison of the pricing methods,it is concluded that the monte carlo simulation pricing results have the smallest error,and this paper finally determines that the monte carlo simulation pricing has the rationality and applicability in the current RMBS product pricing in China.