Reduced Form Mortgage Pricing as an Alternative to Option-Pricing Models

Reduced Form Mortgage Pricing as an Alternative to Option-Pricing Models This paper extends the traditional hazard technique of estimating prepayment and default by allowing their baselines to be stochastic processes, rather than known paths of time, as is typically assumed. By working in the reduced form, this method offers an alternative to the empirical valuation of mortgages more easily implemented than the standard structural form approach of options pricing. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Reduced Form Mortgage Pricing as an Alternative to Option-Pricing Models

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2006 by Springer Science + Business Media, LLC
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-006-9981-7
Publisher site
See Article on Publisher Site

Abstract

This paper extends the traditional hazard technique of estimating prepayment and default by allowing their baselines to be stochastic processes, rather than known paths of time, as is typically assumed. By working in the reduced form, this method offers an alternative to the empirical valuation of mortgages more easily implemented than the standard structural form approach of options pricing.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Nov 13, 2006

References

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