The Valuation and Interest Rate Sensitivity of the Adjustable Rate Mortgage Backed Securities in Taiwan

• Main Authors: Wen-Hui Tzeng, 曾文輝
• Other Authors: Ke-Lu Wang
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/9vjv74

碩士 === 國立交通大學 === 財務金融研究所 === 92 === Mortgage Backed Securities(MBS) is a kind of Fixed Income Securities, In order to valuate this kind of Securities, we must create related term structure of interest rate. Since other factors such as Amortization, Prepayment, Cap and Floor options which are absent in other general Fixed Income Securities also affect the MBS pricing and interest rate risk, In the MBS pricing process, We should take account of these factors. This article valuate adjustable rate MBS price and examine the interest rate sensitivities by comparing different equilibrium interest rate models which are difference in volatility assumption, They are OU、CIR and Linear Drift CEV Diffusion process. We use the maximum likelihood method to estimate the parameters of various interest rate models and use partial adjustment model to describes the relation between market interest rate and mortgage index, We find it in the pure floater circumstance there are no large difference in MBS valuation results among these three interest rate process, and through the option adjusted duration method we find that there are positive correlation between Cap and Margin with the MBS price, in contrast with these, there are negative correlation between adjustment period and Teaser rate with the MBS price. On the side of interest rate sensitivities analysis, all relative results are opposite to that the correlation between MBS price and factors we discuss above. Finally, we investigate the interest rate sensitivities of various mortgage indices which are difference in speed adjusted to market interest rate, we find that the different dynamics of the major ARM indices lead to significant variation in the interest rate sensitivities of loans based on different indices.