Individual Residential Mortgage Loan Prepayment Behavior Analyses and RMBS Pricing Study

Abstract

Abstract:

This paper establishes a capital pool based on 1184 individual residential mortgage loans of a domestic commercial bank's provincial branch in 2015 and issues RMBS based on the pool. Our researches show that the prepayment behaviors of domestic residents are highly distinguished from the circumstances described in foreign literatures so that it's improper to simply bring in the foreign prepayment models in order to price RMBS. This paper firstly analyzes the residents prepayment behaviors in the capital pool and obtains the probability distribution of residents' prepayment time. Next, it simulates borrowers' prepayment behaviors based on agents in order to predict the expected cash inflow of the pool in each period. By discounting the expected cash flow through the fitting of bond maturity yield curve utilizing SV model, this paper finally achieves the pricing of RMBS.

Key words: topological grid, RMBS, pricing

Li Xinping, Deng Lin, Yan Yan. Individual Residential Mortgage Loan Prepayment Behavior Analyses and RMBS Pricing Study[J]. , 2018, 30(7): 26-33.

References

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