Mortgage Choice - The Danish Case
AbstractIn 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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Bibliographic InfoPaper provided by University of Aarhus, Aarhus School of Business, Department of Business Studies in its series Finance Working Papers with number 02-22.
Length: 25 pages
Date of creation: 09 May 2002
Date of revision:
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
More information through EDIRC
Mortgage; Choice; Valuation; Delivery Option; Prepayment;
This paper has been announced in the following NEP Reports:
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- Campbell, John & Cocco, Joao, 2003. "Household Risk Management and Optimal Mortgage Choice," Scholarly Articles 3157876, Harvard University Department of Economics.
- John Y. Campbell & Joao F. Cocco, 2003. "Household Risk Management and Optimal Mortgage Choice," NBER Working Papers 9759, National Bureau of Economic Research, Inc.
- 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.
- 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.
- 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.
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