This paper estimates both parametric and non-parametric proportional hazards models for a subset of Canadian mortgage-backed security data. The estimated parametric hazard function is then used to drive exogenous prepayments within an arbitrage-free model of the term structure of interest rates. Theoretical prices as well as option-adjusted spreads (OAS) are obtained for three different mortgage-backed securities using a Monte-Carlo simulation. Though no formal test is done to compare the ability of the different hazard models to explain observed market prices, the non-parametric baseline hazard is more consistent with the age-dependent prepayment provisions typical of most mortgage contracts in Canada.

Zugl.: Hohenheim, Univ., Diplomarbeit, 2001

Zugl.: Sankt Augustin, Rheinbach, Hennef, Fachhochsch. Bonn-Rhein-Sieg, Diplomarbeit.

Universiẗat, Diplomarbeit, 2001--Hohenheim. / Literaturverz. S. 115-129.

Thesis (Ph. D.)--University of Washington, 1997. / Vita. Includes bibliographical references (leaves [47]-52).

This paper estimates both parametric and non-parametric proportional hazards models for a subset of Canadian mortgage-backed security data. The estimated parametric hazard function is then used to drive exogenous prepayments within an arbitrage-free model of the term structure of interest rates. Theoretical prices as well as option-adjusted spreads (OAS) are obtained for three different mortgage-backed securities using a Monte-Carlo simulation. Though no formal test is done to compare the ability of the different hazard models to explain observed market prices, the non-parametric baseline hazard is more consistent with the age-dependent prepayment provisions typical of most mortgage contracts in Canada. / Business, Sauder School of / Real Estate Division / Graduate

by Lam Suen, Tang Mun-suet. / Thesis (M.B.A.)--Chinese University of Hong Kong, 1995. / Includes bibliographical references (leaves 60-61). / ABSTRACT --- p.iii / TABLE OF CONTENT --- p.v / LIST OF CHARTS/TABLES --- p.vii / CHAPTER / Chapter I. --- INTRODUCTION --- p.1 / Chapter II. --- INTRODUCTION OF MORTGAGE-BACKED SECURITIES --- p.6 / What is Securitization --- p.6 / Types of Mortgage-backed Securities --- p.8 / Mortgage Pass-through Securities --- p.8 / Collateralized Mortgage Obligations --- p.9 / Stripped Mortgage-backed Securities --- p.11 / Chapter III. --- BENEFITS OF SECURITIZATION --- p.14 / Benefits to Issuers --- p.14 / Diversification of Funding Sources and Increased Liquidity --- p.14 / Cost Effective Source of Funds --- p.15 / Efficient Use of Capital --- p.15 / Rapid Portfolio Growth --- p.15 / Better Asset/Liability Management --- p.16 / Earning Enhancement --- p.16 / Benefits to Investors --- p.16 / Benefits to Borrowers --- p.17 / Implication of Securitization for Financial Market --- p.17 / Chapter IV. --- MODELING AND VALUATION OF MORTGAGE-BACKED SECURITIE& --- p.19 / Static Cash Flow Yield (SCFY) Analysis --- p.20 / Advantages and Limitations --- p.21 / Total Rate of return Scenario Analysis (SA) --- p.22 / Advantages and Limitations --- p.23 / Option Adjusted Spreads (OAS) --- p.24 / Advantages and Limitations --- p.26 / Chapter V. --- THE MORTGAGE-BACKED SECURITIES MARKET IN US --- p.27 / U.S. Capital Market --- p.27 / Market Structureof Mortgage-backed Securities in US --- p.28 / Mortgage Originators --- p.28 / Mortgage-backed Securities Issuers --- p.29 / Derivatives of Mortgage-backed Securities --- p.32 / Secondary Mortgage-backed Securities Market --- p.33 / Chapter VI. --- THE HONG KONG MORTGAGE-BACKED SECURITIES MARKET --- p.35 / Mortgage Pool --- p.35 / Characteristics of residential mortgage loans in Hong Kong --- p.35 / Lending policy of authorized institutions since 1989 --- p.37 / Development Of MBS --- p.39 / "Four Mortgage-backed, Bond Sales" --- p.40 / "Bank Of America (Asia) - May, 1994" --- p.40 / "Citibank's Homes-1 - July, 1994" --- p.41 / "Cheung Kong Holdings - September, 1994" --- p.42 / "Standard Chartered Bank's MARS - December, 1994" --- p.44 / Chapter VII. --- DISCUSSION ON HONG KONG MORTGAGED-BACKED SECURITIES MARKET --- p.46 / "Why is the Mortgage-backed, Securities Market Less Important in Hong Kong" --- p.46 / Uncertain Political Environment of Hong Kong --- p.46 / Hong Kong Residential Property Price Inflation --- p.48 / Limited Liquidity --- p.49 / Few Securities with Credit Ratings --- p.49 / Risks of Mortgage-backed Securities --- p.49 / Chapter VIII. --- RECOMMENDATIONS AND FUTURE OF HONG KONG MORTGAGE-BACKED SECURITIES MARKET --- p.55 / Recommendations for Hong Kong Mortgage-backed Securities Market --- p.55 / Credit Enhancement of Securitized Products --- p.55 / Better Market Infrastructure --- p.56 / Liquid Bond Markets --- p.57 / The Future Mortgage-backed Securities Market in Hong Kong --- p.58 / BIBLIOGRAPHY --- p.60

To value any fixed income security one needs to evaluate the discounted expected cash flows according to an arbitrage free interest rate model. In the case of mortgage-backed securities the future cash flows are uncertain due to mortgagors exercise of their prepayment options. The present project considers prepayments which result from interest rate dependent complete refinancing of mortgages in a pool. The rate of refinancing is modeled as an arbitrary, user defined function of current and past interest rates. This enables the inclusion of refinancing rates that depend on not only on the current level of interest rates but also on the trend of the interest rates and that may also exhibit burnout effects due to past periods of low interest rates. The resulting cash flows depend on the entire past of the path that the interest rates took to get to the current level. The Black-Derman-Toy arbitrage free binomial tree is used to model the underlying interest rates. This is a single-factor market price consistent model which also allows the specification of the observed volatilities. Monte Carlo methodology is used to simulate random paths in the interest rate tree to evaluate the cash flows along the path. A computer program written in MAPLE implements the entire process.

Univ., Diss.--Linz, 2004.

Universiẗat, Diss., 2004--Linz.