| Summary: | 碩士 === 朝陽科技大學 === 財務金融系碩士班 === 90 === As the banking institutions originate and hold mortgage loans is the asset, they bear the prepayment risk until borrowers pay off at maturity. In ORDER to reduce prepayment risks and manage interest rate risks, the banking industry can pool the mortgages of low liquidity, repackage and sell them to the capital markets through issuing mortgage-backed securities (MBS), whose cash flows come FROM the underlying pool of mortgages.
This study firstly introduces the asset securitization concept and the process for developing the secondary mortgage markets. Secondly, several prepayment models are reviewed for merits and limitations. Finally, Monte Carlo simulation analysis is adopted for approaching the MBS prices. As SHOW in this study, the value of ARM will more in proportion to its adjusted time period of contract rates.
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