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The Valuation of Mortgage Loan Commitments Using Option Pricing Estimates

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    Abstract

    This paper values mortgage loan commitments in the context of the option pricing theory developed by Black and Scholes, and Merton. A valuation model is derived and empirical results are presented.

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    File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol04n02/v04p013.pdf
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    Bibliographic Info

    Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

    Volume (Year): 4 (1989)
    Issue (Month): 2 ()
    Pages: 13-20

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    Handle: RePEc:jre:issued:v:4:n:2:1989:p:12-20

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    Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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    Web page: http://www.aresnet.org/

    Order Information:
    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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    1. Marcus, Alan J & Shaked, Israel, 1984. "The Valuation of FDIC Deposit Insurance Using Option-pricing Estimates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 446-60, November.
    2. Dothan, Uri & Williams, Joseph, 1981. "Education as an Option," The Journal of Business, University of Chicago Press, vol. 54(1), pages 117-39, January.
    3. Roley, V Vance, 1983. "The Response of Short-Term Interest Rates to Weekly Money Announcements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(3), pages 344-54, August.
    4. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
    5. V. Vance Roley, 1982. "The Response of Short-Term Interest Rates to Weekly Money Announcements," NBER Working Papers 1001, National Bureau of Economic Research, Inc.
    6. Anjan V. Thakor & Hai Hong & Stuart I. Greenbaum, 2004. "Bank Loan Commitments and Interest Rate Volatility," Finance 0411050, EconWPA.
    7. Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring.
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    Cited by:
    1. George W. Kutner & James A. Seifert, 1990. "A Note on the Valuation of Mortgage Loan Commitments: Incorporating the Commitment Cost in the Mortgage Rate," Journal of Real Estate Research, American Real Estate Society, vol. 5(2), pages 281-284.

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