3rd Annual Global Conference on Finance & Accounting (GCFA 2015)

3 / 2015-03-17 12:02:37

Pricing for Short-term Asset Securitization Based on the Perspective of Investors

asset securitization; cumulative prospect theory; utility; risk appetite

The short-term asset securitization presents some characteristic, such as issuing at a discount, absence of repaying ahead of original debtors and lack of reasonable pricing reference rate, therefore the popular asset securitization pricing model is embarrassing, especially repay ahead of schedule model and OAS model. This paper constructs a short-term asset securitization pricing model based on the cumulative prospect theory, which derives the optimal price when the utility of investors is maximal, and gives a simulation case. Results show that the model has a single optimal price which only depends on the characteristics of risk appetite and loss aversion of investors given distribution function of market random disturbance and issuing value. Simulation case indicates that optimal price is acceptable so this model can be as a reference method of short-term asset securitization pricing.