Abstract
The economic environment of Taiwan has changed. The demand of commercial mortgage has become huge. The commercial mortgage backed securities would be the main trend and be popular in financial market. Commercial mortgage backed securities (CMBS) is different from residential mortgage backed securities. Much larger size of the underlying loans and the much smaller number of them magnify the prepayment risk for CMBS. In the CMBS market, the vast majority of mortgages have some form of prepayment penalty. The prepayment penalty would affect prepayment behavior and cash flow of CMBS. So, it will affect the price of CMBS. The research develops the pricing model of CMBS with CIR interest model and Monte Carlo simulation method. And to probe into how prepayment penalty to affect prepayment ratio and price of CMBS.