The Pricing of Mortgage-Backed Securities

• Main Authors: Chia-Cheng Hsu, 徐嘉呈
• Other Authors: Meng-Lan Yueh
• Format: Others
• Language: en_US
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/96328008491747552995

碩士 === 國立中央大學 === 財務金融研究所 === 92 === In this thesis, we use both prepayment option and default option to describe prepayment behavior to find the optimal time for each mortgage holder to prepay his or her mortgage loan. Furthermore, we estimate the prepayment rate at each month. In addition, we separate the role of the short term interest rate as the discount factor from that of the mortgage interest rate as an incentive factor associated with prepayment. The characteristic of each mortgage holder in the pool is all different. Therefore, in our model, we also consider heterogeneity of each mortgage holder in the pool and assume that heterogeneity is the fraction of the remaining principal balance. In addition, through simulations, we find that our model can capture various exogenous factors which influence the price, weighted-average life and duration of MBS. Finally, we develop a way to redistribute cash flows into different tranches.