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Simon Aldrich, W. Greenberg, Brook Payner (2001)
A Capital Markets View of Mortgage Servicing Rights, 11
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(2000)
the delinquency penalty in this paper is set at 11
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Equation (19) suggests that the delinquent sub-branches are allowed to return to the main tree if the delinquent loan is cured
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(2005)
Ross , “ A Theory of the Term Structure of Interest Rates . ”
Che-Chun Lin, Lan-chih Ho (2005)
Valuing Individual Mortgage Servicing Contracts: A Comparison between Adjustable Rate Mortgages and Fixed Rate MortgagesReview of Pacific Basin Financial Markets and Policies, 08
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Valuing Prepayment and Default in a Fixed‐Rate Mortgage: A Bivariate Binomial Options Pricing TechniqueReal Estate Economics, 26
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A Theory for the Term Structure of Interest RatesThe Finance
The servicing cost is ignored in the delinquency node because we have taken into account those costs during the delinquency period
(2005)
Valuing U.S. and Canadian Mortgage Servicing Rights
(2000)
indicate that the option to reinstate the mortgage does not change the prepayment boundary conditions, while the default options do change the prepayment boundary conditions
During the delinquency period, we assume that only one delinquency is allowed even though the borrower reinstates the mortgage
(2005)
Valuing Individual Mortgage Servicing Contracts: A Comparison between Fixed-Rate Mortgages and Adjustable-Rate Mortgages
R. Ignatius (1998)
Mortgage Prepayment Float: Pricing and Risk AnalysisCfa Digest, 28
We develop a bivariate binomial model to price Mortgage Servicing Rights (MSRs). Our model is an improvement over previous MSR pricing models by explicitly incorporating the realistic assumptions that there are additional costs involved in servicing delinquent loans. In addition to the Hilliard et al. mortgage-pricing tree, we extend additional sub-branches to model the borrower's decision of prepayment, cure, and foreclosure after a loan becomes delinquent. We then investigate how the value of the Mortgage Servicing Right varies with interest rate volatility, house price volatility, delinquency options, deficiency judgments, default penalties, forbearance periods, and speed of adjustments factors.
Review of Quantitative Finance and Accounting – Springer Journals
Published: Jan 1, 2006
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