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Mortgage Choice - The Danish Case

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Author Info
Svenstrup, Mikkel () (Department of Finance, Aarhus School of Business)
Abstract

In this paper we analyze the mortgage choice faced by Danish borrowers.

Based on an analysis of the most popular Danish mortgage products,

we argue that Adjustable-Rate Mortgages (ARM) with life time caps will

combine the most attractive features from straight ARMs and callable

Fixed-Rate Mortgages (FRM). Furthermore, we find the delivery option

embedded in Danish mortgages to be an important feature, which protects

households from the risk of insolvency by facilitating a closer match

between assets and liabilities in the household portfolio.

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Publisher Info
Paper provided by University of Aarhus, Aarhus School of Business, Department of Business Studies in its series Finance Working Papers with number 02-22.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 25 pages
Date of creation: 09 May 2002
Date of revision:
Handle: RePEc:hhb:aarfin:2002_022

Contact details of provider:
Postal: The Aarhus School of Business, Fuglesangs Allé 4, DK-8210 Aarhus V, Denmark
Fax: + 45 86 15 19 43
Web page: http://www.asb.dk/about/departments/bs.aspx
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Related research
Keywords: Mortgage; Choice; Valuation; Delivery Option; Prepayment;

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  1. Dhillon, Upinder S & Shilling, James D & Sirmans, C F, 1987. "Choosing between Fixed and Adjustable Rate Mortgages: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(2), pages 260-67, May. [Downloadable!] (restricted)
  2. Brueckner, Jan K & Follain, James R, 1988. "The Rise and Fall of the ARM: An Econometric Analysis of Mortgage Choice," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 93-102, February. [Downloadable!] (restricted)
  3. John Y. Campbell & Joao F. Cocco, 2003. "Household Risk Management and Optimal Mortgage Choice," NBER Working Papers 9759, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 53(2), pages 385-407, March. [Downloadable!] (restricted)
  5. LeRoy, Stephen F, 1996. "Mortgage Valuation under Optimal Prepayment," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 9(3), pages 817-44. [Downloadable!] (restricted)
  6. Stanton, Richard & Wallace, Nancy, 1999. "Anatomy of an ARM: The Interest-Rate Risk of Adjustable-Rate Mortgages," The Journal of Real Estate Finance and Economics, Springer, vol. 19(1), pages 49-67, July. [Downloadable!] (restricted)
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This page was last updated on 2009-11-25.

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