Macroeconomic-Driven Prepayment Risk and the Valuation of Mortgage-Backed Securities

• 成果类型: Article
• 署名作者: Chernov, Mikhail; Dunn, Brett R.; Longstaff, Francis A.
• 署名单位: University of California System; University of California Los Angeles; National Bureau of Economic Research; Center for Economic & Policy Research (CEPR)
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhx140
• 发表日期: 2018
• 页码: 1132
• 关键词: term structure; RESIDENTIAL MORTGAGES; default risk; Credit risk; MARKET; MODEL; MBS; Heterogeneity; purchases; CONTRACTS

摘要

We develop a three-factor no-arbitrage model for valuing mortgage-backed securities in which we solve for the implied prepayment function from the cross-section of market prices. This model closely fits the cross-section of mortgage-backed security prices without needing to specify an econometric prepayment model. We find that implied prepayments are generally higher than actual prepayments, providing direct evidence of significant macroeconomic-driven prepayment risk premiums in mortgage-backed security prices. We also find evidence that mortgage-backed security prices were significantly affected by Fannie Mae credit risk and the Federal Reserve's quantitative easing programs.