Abstract
In recent years, with the rapid increase of the business volume of housing mortgage loans of commercial banks, the risk of prepayment is increasingly exposed. Prepayment will have a great impact on the duration and convexity of housing mortgage loans of commercial banks and then bring difficulties to the asset liability management of banks. Therefore, empirical research on the changes of duration and convexity of housing mortgage loans caused by prepayment when the market interest rate changes is of great significance for commercial banks to manage interest rate risk exposure. Based on the analysis of the option characteristics of prepayable housing mortgage loan, the CIR model with GARCH(1, 1) is selected to describe the interest rate change path, and the computer simulation method is used to calculate OAS and then calculate the effective duration and effective convexity of housing mortgage loan under different prepayment rates, so as to understand the interest rate risk of housing mortgage loan in the presence of embedded option.
Highlights
Since the 1980s, China’s real estate market began to start
When the total amount of personal consumption credit in the whole society is growing rapidly and the housing mortgage loan business of commercial banks is booming, the risks contained in the housing mortgage loan, as the main assets of banks, are increasingly exposed, especially the phenomenon of loan prepayment caused by the changes of benchmark interest rate of deposit loan and personal income is becoming more and more obvious. at is to say, the prepayment risk of housing mortgage is exposed [1]
Under the background of interest rate marketization in China, commercial banks will face frequent and large fluctuation of benchmark interest rate of deposit and loan in the future, so commercial banks have to face up to the phenomenon of prepayment of housing mortgage loan and take active measures to deal with the interest rate risk of housing mortgage loan caused by prepayment [3]. erefore, studying the impact of prepayment on the duration and convexity of housing mortgage loan from the microperspective can provide some ideas for commercial banks to manage interest rate risk
Summary
Since the 1980s, China’s real estate market began to start. After several years of tortuous development, it entered a stable development stage in 1995. In the context of the prosperity and development of the real estate market, in 1992, China Construction Bank began to issue the first housing mortgage loan business. Is innovative financial way enabled most people who could not afford to buy a house with full payment to realize their dream of buying a house It greatly improved the consumption ability of Chinese urban residents and stimulated the demand of the whole real economy. Under the background of interest rate marketization in China, commercial banks will face frequent and large fluctuation of benchmark interest rate of deposit and loan in the future, so commercial banks have to face up to the phenomenon of prepayment of housing mortgage loan and take active measures to deal with the interest rate risk of housing mortgage loan caused by prepayment [3]. erefore, studying the impact of prepayment on the duration and convexity of housing mortgage loan from the microperspective can provide some ideas for commercial banks to manage interest rate risk
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