English, Article edition: AN INTENSITY-BASED APPROACH TO THE VALUATION OF MORTGAGE CONTRACTS AND COMPUTATION OF THE ENDOGENOUS MORTGAGE RATE YEVGENY GONCHAROV

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Bookmark: http://trove.nla.gov.au/version/83389
Physical Description
  • article
Language
  • English

Edition details

Title
  • AN INTENSITY-BASED APPROACH TO THE VALUATION OF MORTGAGE CONTRACTS AND COMPUTATION OF THE ENDOGENOUS MORTGAGE RATE
Author
  • YEVGENY GONCHAROV
Physical Description
  • article
Notes
  • This paper gives a general mortgage model subject to sub-optimal prepayment behavior of borrowers. The proposed classification of approaches to the option-based and mortgage-rate-based (MRB) specification is validated by the fact that these two approaches require different analytical and numerical tools. With the option-based specification of the prepayment intensity, our model is the first continuous-time model; this gives advantage in the numerical treatment of the model. We propose a new approach based on the MRB idea with the endogenous mortgage rate process. The mortgage rate process is defined and the existence of a solution is proven for the option-based specification of the prepayment process. A numerical procedure for finding the endogenous mortgage rate is proposed.
  • Mortgage, option-based approach, prepayment, intensity, mortgage rate
  • RePEc:wsi:ijtafx:v:09:y:2006:i:06:p:889-914
Language
  • English
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