MBS Price Decision and Internal Relationship with CPR

As one of the earliest products of asset securitization, MBS has played an important role in promoting the development of the subsequent financial derivatives. The determination of its price is influenced by several economic factors such as market interest rates and trading frequencies. Thus, our study accurately discusses the calculation the MBS price with multiple steps. Furthermore, we analyze the internal relationship between CPR and MBS price through Newton method. The results show that the movement trends CPR and MBS price are probably in the opposite directions, which is quite consistent with the realistic economy.