1-CPR=(1-SMM)12.

Premature repayment means early repayment, which means that the debtor repays its debt in advance due to factors such as changes in the macro environment and its own income. When prepayment occurs, the amount paid by the debtor is higher than the initially set monthly repayment plan, and the excess will cause the outstanding principal to be paid off in advance. Early repayment can be divided into two situations: partial early repayment and full repayment.

What is the prepayment rate:

The prepayment rate refers to the proportion of the debtor's early repayment of debt in the outstanding principal balance of the asset pool in personal housing mortgage loans. . The single-month liquidation rate and the conditional prepayment rate are the two basic indicators for calculating the prepayment rate.

It is recommended that when selecting RMBS, investors should not only pay attention to factors such as the structure of the product and the repayment method of assets, but also make reasonable predictions about the early repayment situation of RMBS and fully consider the early repayment situation of similar products of the sponsor. repayment situation, and refer to the overall trend and fluctuation range of early repayment of similar products on the market.

We can consider establishing a residential mortgage loan securitization prepayment database to conduct a systematic and comprehensive analysis of the prepayment situation of various products in the Chinese market to avoid facing reinvestment risks and consequences due to underestimation of prepayment. Early repayment is overvalued and faces the risk of underpricing the product.