3. An Options Approach to Commercial …（3所示。）.pdfVIP

An Options Approach to Commercial Mortgages and CMBS Valuation and Risk Analysis INTRODUCTION July, 2001 Investment in commercial mortgages and commercial mortgage-backed securities (CMBS) has received increased attention from mainstream fixed-income investors. Yet, much of the quantitative technology that has been developed for analyzing relative value in such areas as residential mortgage-backed securities (MBS) and corporate bonds has not been applied to commercial mortgages. Investors in agency mortgage-backed securities and callable corporate bonds, for example, have used option pricing to determine fair value for securities whose cash flows are uncertain due to the possibility of an early call. Commercial mortgages typically have greater call protection than residential MBS and corporate bonds, although they still have some callability. Most commercial mortgages have lock-out periods followed by a period during which a penalty is applied to premature principal payments, followed in turn by a free period. The technology applied to other fixed-income instruments to value these features could be used for assessing risk and relative value in commercial mortgages and CMBS. In addition to the risk of early principal payment, commercial mortgages, like corporate bonds, are subject to the risk of losses in a foreclosure following a default. Pricing methodology described in academic journals has been applied to this risk for corporate bonds, but for a variety of reasons it has not proven to be practical.1 The analysis and valuation of this risk for commercial mortgages using similar quantitative analysis, while