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Determinants of GNMA Mortgage Prices

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  • Michael J. Brennan
  • Eduardo S. Schwartz
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    Abstract

    This paper contrasts three different arbitrage-based models for the pricing of GNMA securities, and analyzes the effect of different assumptions about the call policy pursued by the issuers of the underlying mortgages. Both the nature of the interest-rate uncertainty captured by the model and the assumed call policy have a major effect on the yield differentials predicted between GNMA securities and Treasury Bonds. Copyright American Real Estate and Urban Economics Association.

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/1540-6229.00351
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    Bibliographic Info

    Article provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.

    Volume (Year): 13 (1985)
    Issue (Month): 3 ()
    Pages: 209-228

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    Handle: RePEc:bla:reesec:v:13:y:1985:i:3:p:209-228

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    Cited by:
    1. Nai Jia Lee, 2003. "Expected Return of Housing and Mortgage Termination," International Real Estate Review, Asian Real Estate Society, Asian Real Estate Society, vol. 6(1), pages 75-101.
    2. Longstaff, Francis A., 2002. "Optimal Recursive Refinancing and the Valuation of Mortgage-Backed Securities," University of California at Los Angeles, Anderson Graduate School of Management, Anderson Graduate School of Management, UCLA qt19k7479t, Anderson Graduate School of Management, UCLA.
    3. Nicholas Sharp & Paul Johnson & David Newton & Peter Duck, 2009. "A New Prepayment Model (with Default): An Occupation-time Derivative Approach," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 39(2), pages 118-145, August.
    4. (David) Ho, Kim Hin & Su, Huiyong, 2006. "Structural prepayment risk behavior of the underlying mortgages for residential mortgage life insurance in a developing market," Journal of Housing Economics, Elsevier, Elsevier, vol. 15(3), pages 257-278, September.
    5. Charlier, E. & Bussel, A. van, 2001. "Prepayment Behavior of Dutch Mortgagors: An Empirical Analysis," Discussion Paper, Tilburg University, Center for Economic Research 2001-64, Tilburg University, Center for Economic Research.
    6. Francis A. Longstaff, 2004. "Optimal Recursive Refinancing and the Valuation of Mortgage-Backed Securities," NBER Working Papers 10422, National Bureau of Economic Research, Inc.
    7. Deng, Yongheng & Quigley, John M. & Van Order, Robert & Mac, Freddie, 1996. "Mortgage default and low downpayment loans: The costs of public subsidy," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 263-285, June.
    8. Yongheng Deng & Della Zheng & Changfeng Ling, 2005. "An Early Assessment of Residential Mortgage Performance in China," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 31(2), pages 117-136, September.
    9. Harding, John P., 2000. "Mortgage Valuation with Optimal Intertemporal Refinancing Strategies," Journal of Housing Economics, Elsevier, Elsevier, vol. 9(4), pages 233-266, December.
    10. Leon G. Shilton & James R. Webb, 1989. "Commercial Loan Underwriting and Option Valuation," Journal of Real Estate Research, American Real Estate Society, American Real Estate Society, vol. 4(1), pages 1-12.
    11. Leon G. Shilton & John Teall, 1994. "Option-Based Prediction of Commercial Mortgage Defaults," Journal of Real Estate Research, American Real Estate Society, American Real Estate Society, vol. 9(2), pages 219-236.
    12. Michael LaCour-Little & Michael Marschoun & Clark L. Maxam, 2002. "Improving Parametric Mortgage Prepayment Models with Non-parametric Kernel Regression," Journal of Real Estate Research, American Real Estate Society, American Real Estate Society, vol. 24(3), pages 299-328.
    13. Robert O. Edmister & Gay B. Hatfield, 1995. "The Significance of Porfolio Lenders to Real Estate Brokers," Journal of Real Estate Research, American Real Estate Society, American Real Estate Society, vol. 10(1), pages 57-68.

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