English, Article edition: Optimal mortgage refinancing: application of bond valuation tools to household risk management Andrew Kalotay; Deane Yang; Frank Fabozzi

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/50771
Physical Description
  • article
Language
  • English

Edition details

Title
  • Optimal mortgage refinancing: application of bond valuation tools to household risk management
Author
  • Andrew Kalotay
  • Deane Yang
  • Frank Fabozzi
Physical Description
  • article
Notes
  • Despite the enormous volume of refinancing activity in conventional residential mortgages, reaching record levels during recent years of historically low interest rates, the solution to the problem of how to time refinancing decisions optimally has remained elusive. It is recognized that the decision should depend, among other factors, on the 'call' options of the outstanding and the new mortgage. Determining the value of these options is a challenge in the absence of an observable optionless mortgage yield curve. We solve this by calibrating a benchmark interest rate process to the value of the new mortgage and then apply the notion of refinancing efficiency to the timing decision. In particular, risk-averse decision makers can use refinancing efficiency to measure how close to optimal a refinancing is. We analyse the sensitivity of the decision to interest rate volatility and also show how to incorporate homeowner-specific considerations, namely borrowing horizon and income taxes. While calibration and refunding efficiency are well-known techniques in bond analysis, there is no evidence, hitherto, of their application to the mortgage-refinancing problem.
  • RePEc:taf:apfelt:v:4:y:2008:i:2:p:141-149
Language
  • English
Contributed by
OAIster

Get this edition

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment