UK fixed rate repayment mortgage indemnity valuation

Detalhes bibliográficos
Autor(a) principal: Pereira, José Azevedo
Data de Publicação: 2000
Outros Autores: Newton, David P., Paxson, Dean A.
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10400.5/23570
Resumo: We use a mean-reverting interest rate model and a lognormal house price diffusion model to evaluate British fixed rate mortgage contracts with (embedded) default and prepayment options. The valuation model also provides values for mortgage indemnity guarantees and the corresponding lenders' coinsurance. Since the partial differential equation incorporating the general features of these mortgage contracts does not have a closed-form solution, an explicit finite difference method was used to solve the problem. Changes in contractual features in common mortgage products lead to different equilibrium coupon rates and different values for mortgage components. Our numerical results suggest that mortgage modelling include both of these contractual provisions and the embedded options in order to prevent biased and misleading mortgage valuation.
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spelling UK fixed rate repayment mortgage indemnity valuationHouse PricesMortgage ContratsMortgage ValueMortgage ModellingUnited KingdomWe use a mean-reverting interest rate model and a lognormal house price diffusion model to evaluate British fixed rate mortgage contracts with (embedded) default and prepayment options. The valuation model also provides values for mortgage indemnity guarantees and the corresponding lenders' coinsurance. Since the partial differential equation incorporating the general features of these mortgage contracts does not have a closed-form solution, an explicit finite difference method was used to solve the problem. Changes in contractual features in common mortgage products lead to different equilibrium coupon rates and different values for mortgage components. Our numerical results suggest that mortgage modelling include both of these contractual provisions and the embedded options in order to prevent biased and misleading mortgage valuation.ISEG - Departamento de GestãoRepositório da Universidade de LisboaPereira, José AzevedoNewton, David P.Paxson, Dean A.2022-02-17T11:51:36Z20002000-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.5/23570engPereira, José Azevedo . David P. Newton e Dean A. Paxson .2000. “UK fixed rate repayment mortgage indemnity valuation” . Instituto Superior de Economia e Gestão. Departamento de Gestão /Cadernos de Económicas /Documento de trabalho nº 3-00.0874-8470info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-03-06T14:53:08Zoai:www.repository.utl.pt:10400.5/23570Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T17:07:46.784941Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv UK fixed rate repayment mortgage indemnity valuation
title UK fixed rate repayment mortgage indemnity valuation
spellingShingle UK fixed rate repayment mortgage indemnity valuation
Pereira, José Azevedo
House Prices
Mortgage Contrats
Mortgage Value
Mortgage Modelling
United Kingdom
title_short UK fixed rate repayment mortgage indemnity valuation
title_full UK fixed rate repayment mortgage indemnity valuation
title_fullStr UK fixed rate repayment mortgage indemnity valuation
title_full_unstemmed UK fixed rate repayment mortgage indemnity valuation
title_sort UK fixed rate repayment mortgage indemnity valuation
author Pereira, José Azevedo
author_facet Pereira, José Azevedo
Newton, David P.
Paxson, Dean A.
author_role author
author2 Newton, David P.
Paxson, Dean A.
author2_role author
author
dc.contributor.none.fl_str_mv Repositório da Universidade de Lisboa
dc.contributor.author.fl_str_mv Pereira, José Azevedo
Newton, David P.
Paxson, Dean A.
dc.subject.por.fl_str_mv House Prices
Mortgage Contrats
Mortgage Value
Mortgage Modelling
United Kingdom
topic House Prices
Mortgage Contrats
Mortgage Value
Mortgage Modelling
United Kingdom
description We use a mean-reverting interest rate model and a lognormal house price diffusion model to evaluate British fixed rate mortgage contracts with (embedded) default and prepayment options. The valuation model also provides values for mortgage indemnity guarantees and the corresponding lenders' coinsurance. Since the partial differential equation incorporating the general features of these mortgage contracts does not have a closed-form solution, an explicit finite difference method was used to solve the problem. Changes in contractual features in common mortgage products lead to different equilibrium coupon rates and different values for mortgage components. Our numerical results suggest that mortgage modelling include both of these contractual provisions and the embedded options in order to prevent biased and misleading mortgage valuation.
publishDate 2000
dc.date.none.fl_str_mv 2000
2000-01-01T00:00:00Z
2022-02-17T11:51:36Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/10400.5/23570
url http://hdl.handle.net/10400.5/23570
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv Pereira, José Azevedo . David P. Newton e Dean A. Paxson .2000. “UK fixed rate repayment mortgage indemnity valuation” . Instituto Superior de Economia e Gestão. Departamento de Gestão /Cadernos de Económicas /Documento de trabalho nº 3-00.
0874-8470
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv ISEG - Departamento de Gestão
publisher.none.fl_str_mv ISEG - Departamento de Gestão
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron:RCAAP
instname_str Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron_str RCAAP
institution RCAAP
reponame_str Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
collection Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
repository.name.fl_str_mv Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
repository.mail.fl_str_mv
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