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UBC Theses and Dissertations

Prepayment behavior of Canadian mortgage backed securities Fu, Seung Tak


Mortgage-Backed securities (MBS) represent a financial instrument which "securitizes" residential first mortgages. Although the trading processes of MBS are similar to those of bonds, there are significant differences between the valuation methods of MBS and other securities. One of the sources of these differences is the possibility of prepayment of the mortgages. This study makes the distinction between full prepayment and partial prepayment. The results of this study suggest that full prepayment is directly related to housing market activities and partial prepayment is affected mainly by the prepayment provision in the mortgage contracts.

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