Download or read book Valuing Prepayment and Default in a Fixed Rate Mortgage written by Jimmy E. Hilliard and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses a bivariate binomial options pricing technique to value the prepayment and default options in a fixed-rate mortgage. The American style options are dependent on two stochastic variables: (1) house price, (2) one year spot rate. The paper uses the standard lognormal process for house price and the CIR square-root process for interest rates. By forcing the two underlying state variables to undergo transformations, two new uncorrelated variables with constant volatilities are established. With constant volatilities, a computationally simple bivariate binomial tree is formed which greatly reduces the complexity of working with two state variables and is pedagogicallyuseful. Using this procedure, the price of any real estate contingent claim whose value is dependent on the one year spot rate and house price can be determined. Results are compared with those from a finite difference model.
Download or read book The Valuation at Origination of Fixed Rate Mortgages with Default and Prepayment written by James B. Kau and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a model to rationally price fixed rate mortgages, using the arbitrage principles of option pricing theory. The paper incorporates amortization, prepayment and default in valuing the mortgage. Having completely specified the model, numerical procedures value the different features of the mortgage contract under a variety of economic conditions. The necessity of having both the interest rate and the house price as explanatory variables, due to the interaction of default and prepayment, is demonstrated. The numerical solutions presented center around mortgage pricing at origination. Thus, variations in the equilibrium contract rate are examined for differing economic conditions and changes in the contract. Finally, by presenting a complete model, the paper yields insights for the existence of common institutional practices.
Download or read book Valuing a Fixed rate Mortgage written by Vester Carlos Slawson and published by . This book was released on 1995 with total page 266 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book An Improved Fixed Rate Mortgage Valuation Methodology with Interacting Prepayment and Default Options written by Nick J. Sharp and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper considers in detail a realistic mortgage valuation model (including the potential for early prepayment and the risk of default), based on stochastic house-price and interest-rate models. As well as the development of a highly accurate numerical scheme to tackle the resulting partial differential equations, this paper also exploits singular perturbation theory (a mathematically rigorous procedure, based on the idea of the smallness of the volatilities), whereby mortgage valuation can be accurately approximated by very simple closed-form solutions. Determination of equilibrium contract rates, previously requiring many computational hours is reduced to just a few seconds, rendering this a highly useful portfolio management tool; these approximations compare favorably with the full numerical solutions. The method is of wide applicability in US or other mortgage markets and is demonstrated for UK fixed-rate mortgages, including insurance and coinsurance.
Download or read book Mortgage Backed Securities written by Frank J. Fabozzi and published by John Wiley & Sons. This book was released on 2010-12-30 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt: An in-depth look at the latest innovations in mortgage-backed securities The largest sector of the fixed-income market is the mortgage market. Understanding this market is critical for portfolio managers, as well as issuers who must be familiar with how these securities are structured. Mortgage-Backed Securities is a timely guide to the investment characteristics, creation, and analysis of residential real estate-backed securities. Each chapter contains cutting-edge information for investors, traders, and other professionals involved in this market, including discussions of structuring mortgage products-such as agency CMOs and new types of mortgages-and an in-depth explanation of the concept of option-adjusted spreads and other analytical concepts used to assess relative value.
Download or read book Option Theory and Fixed Rate Mortgages written by and published by . This book was released on 1986 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book A Framework for Analyzing the Simultaneous Default and Prepayment Options for Fixed Rate Mortgages written by Robert H. Edelstein and published by . This book was released on 1992 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Household Credit Usage written by B. W. Ambrose and published by Springer. This book was released on 2007-10-29 with total page 293 pages. Available in PDF, EPUB and Kindle. Book excerpt: In response to growing interest in household finance, this collection of essays with a foreword by John Y. Campbell, studies household and consumer use of credit instruments. It shows how individual consumers and households utilize various credit alternatives in managing their consumption and savings and suggests areas for future research.
Download or read book Mortgage Default and Mortgage Valuation written by John Krainer and published by DIANE Publishing. This book was released on 2010-10 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: The authors develop an equilibrium valuation model that incorporates optimal default to show how mortgage yields and lender recovery rates on defaulted mortgages depend on initial loan-to-value (LTV) ratios. The analysis treats both the frictionless case and the case in which borrowers and lenders incur deadweight costs upon default. The model is calibrated using data on California mortgages. Given reasonable parameter values, the model does a surprisingly good job fitting the risk premium in the data for high LTV mortgages. Thus, from an ex ante perspective, the authors do not find strong evidence of systematic underpricing of default risk in the run-up to the housing market crisis. Charts and tables.
Download or read book Valuing Default and Prepayment Options in Mortgages written by 黃恢泓 and published by . This book was released on 2001 with total page 96 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Adjustable and Fixed Rate Mortgage Termination Option Values and Local Market Conditions written by James Vanderhoff and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the probabilities of prepayment or default for Fixed Rate Mortgages (FRMs) and Adjustable Rate Mortgages (ARMs). Using data from the period 1985-1992, the analysis indicates that the likelihood of prepayment of thirty year FRMs was determined primarily by house price appreciation and personal income growth and the likelihood of prepayment of fifteen year FRMs determined primarily by interest rate changes. ARMs were prepaid less frequently than FRMs, were less likely to be prepaid when interest rates declined and defaulted more often than FRMs. The analysis provides evidence that ARM holders are less mobile than FRM holders.
Download or read book Handbook of Asset and Liability Management written by Alexandre Adam and published by John Wiley & Sons. This book was released on 2008-03-11 with total page 576 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the Handbook of Asset and Liability Management: From Models to Optimal Return Strategies, Alexandre Adam presents a comprehensive guide to Asset and Liability Management. Written from a quantitative perspective with economic explanations, this book will appeal to both mathematicians and non-mathematicians alike as it gives an operational view on the business. Well structured, this book includes essential information on Balance Sheet Items and Products Modeling, Tools for Asset and Liability Managers, as well as Optimal Returns Strategies. Explaining, in detail, all the written and unwritten rules of Asset Liability Management, using up-to-date models and the latest findings, the Handbook of Asset and Liability Management is an essential tool for Asset and Liability Managers both for the present day and the future.
Download or read book A New Prepayment Model with Default written by Nick J. Sharp and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: A new prepayment model is developed, which improves the modeling of the borrowers decision process by incorporating an occupation-time derivative in the valuation framework of a fixed-rate mortgage. This option-theoretic mortgage valuation model is based on stochastic house-price and interest-rate models, and requires a particularly subtle technique to incorporate a new type of occupation-time derivative, where the barrier (which activates the derivative) is in the value process and not the underlying process (as it is in standard occupation-time derivatives). This new model simulates a delay in prepayment by the borrower (beyond the time simple ruthless prepayment dictates), thus increasing the value of the mortgage to the lender, compared to the value gained using more basic models. This allows for a more advanced borrowers decision process, where a rational exercise structure is retained in a modified form. Empirical evidence supports this theory, which should be beneficial for accurate mortgage-backed security pricing. The results in this paper explore thoroughly the effect on the mortgage value of a delay in prepayment by the borrower on the embedded options held and on the insurance component.
Download or read book A Trinomial Model for the Valuation of the Prepayment and Default Options in Fixed rate Mortgages with an Application to Low income Housing Projects in the Washington Metropolitan Area written by Imad Atef Elhaj and published by . This book was released on 19?? with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Valuing the Mortgage Borrower s Prepayment Option written by Arden R. Hall and published by . This book was released on 1984 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Relative Termination Probabilities of Adjustable rate Mortgages written by Donald F. Cunningham and published by . This book was released on 1988 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Mortgage Curtailment and Its Roles in Mortgage Pricing written by Qiang Fu and published by . This book was released on 1998 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt:
