Hong Kong Residential Mortgage Prepayment Analysis and Modeling

Abstract

Prepayment analysis has play a crucial role in the development of the U.S. mortgage-backed securities market. Fortunes have been made and lost on right or wrong prepayment forecasts. The mortgage-backed securities market is expected to develop significantly in Hong Kong. To help investors and issuers understand prepayment behavior and analyze different mortgage-backed instruments, this report describes one of the first prepayments analyses and models for Hong Kong residential mortgages. The article discusses the economic variables and mortgage characteristics that influence prepayment behavior.