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Competing Risks Modelsusing Mortgage Duration Data under the Proportional Hazards Assumption

Author

Listed:
  • MARK YUYING AN

    (Fannie Mae)

  • ZHIKUN QI

    (Fannie Mae)

Abstract

This paper demonstrates two important results related to the estimation of a competing risks model under the proportional hazards assumption with grouped duration data, a model which has become the canonical model for the termination of mortgages with prepayment and default as two competing risks. First we show that the model with non-parametric baseline hazards is unidentifiable with only grouped mortgage duration data. Therefore assumption on the functional form of the baseline hazard is necessary for any meaningful inference. Secondly we demonstrate that under some parametric assumption such as piece-wise constant baseline hazards, the sample likelihood function has an explicit analytical form. Therefore there is no need for the approximation formula widely adopted in the previous literature. Both Monte Carlo simulations and actual mortgage data are used to demonstrate the adverse impact of the approximation.

Suggested Citation

  • Mark Yuying An & Zhikun Qi, 2012. "Competing Risks Modelsusing Mortgage Duration Data under the Proportional Hazards Assumption," Journal of Real Estate Research, American Real Estate Society, vol. 34(1), pages 1-26.
    • Handle: RePEc:jre:issued:v:34:n:1:2012:p:1-26
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    Cited by:

    1. Bo Liu & Tien Foo Sing, 2018. "“Cure” Effects and Mortgage Default: A Split Population Survival Time Model," The Journal of Real Estate Finance and Economics, Springer, vol. 56(2), pages 217-251, February.
    2. Cichulska Aneta & Wisniewski Radosław, 2017. "Issue Of Risk In Literature," Real Estate Management and Valuation, Sciendo, vol. 25(3), pages 74-86, September.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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