Abstract: In this paper, we use the data of residential mortgage-backed securities (RMBS) issued by domestic commercial banks as sample to screen the main influencing factors of prepayment risk from three dimensions: macro environment, base asset quality and characteristics of borrowers. Then we construct a cash flow stress test model which includes stress factors such as default rate, default distribution, prepayment rate and other factors, and calculate the corresponding critical default risk. The empirical result demonstrates that the critical default rate of RMBS senior notes is much higher than the historical average level of default rate given the current condition. However, the protective layers of different tranches of RMBS senior notes tend to be broken simultaneously at critical value, indicating that different tranches have the same level of tolerance for default risk. This conclusion provides evidence for commercial banks to measure critical default risk and analyze credit risk premium of RMBS.

Key words: RMBS, prepayment risk, critical default rate, cash flow stress test