منابع مشابه
Portfolio Optimization and Mortgage Choice
This paper studies the optimal mortgage choice of an investor in a simple bond market with a stochastic interest rate and access to term life insurance. The study is based on advances in stochastic control theory, which provides analytical solutions to portfolio problems with a stochastic interest rate. We derive the optimal portfolio of a mortgagor in a simple framework and formulate stylized ...
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Solving realistic dynamic asset allocation problems remains a challenge. While considerable progress with respect to theoretical insights has been made in the past years using dynamic programming, this technique is hardly applicable to deal with industry problems involving numerous sources of uncertainty and path-dependent variables. An alternative solution strategy that has been applied to var...
متن کاملMortgage Choice: What's the Point?
This paper shows that, in the presence of transaction costs payable by borrowers on refinancing, it is possible to construct a separating equilibrium in which borrowers with differing mobility select fixed rate mortgages (FRMs) with different combinations of coupon rate and points. We also show that, in the absence of such costs, no such equilibrium is possible. This provides a possible explana...
متن کاملHouse Price Beliefs and Mortgage Leverage Choice∗
We study the effects of homebuyers’ beliefs about future house price changes on their mortgage leverage choice. We show that, from a theoretical perspective, the relationship between homebuyers’ beliefs and their leverage choice is ambiguous, and depends on the magnitude of a “collateral adjustment friction” that reduces homebuyers’ willingness to adjust their house size in response to beliefs ...
متن کاملHousehold Risk Management and Optimal Mortgage Choice
A typical household has a home mortgage as its most significant financial contract. The form of this contract is correspondingly important. This paper studies the choice between a fixed-rate (FRM) and an adjustable-rate (ARM) mortgage. In an environment with uncertain inflation, a nominal FRM has risky real capital value whereas an ARM has a stable real capital value. However an ARM can increas...
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ژورنال
عنوان ژورنال: Journal of Risk and Financial Management
سال: 2017
ISSN: 1911-8074
DOI: 10.3390/jrfm10010001