Comparing mortgage credit risk policies : an options-based approach
AbstractBuckley, Karaguishiyeva,Van Order, and Vecvagare analyze the structure of approaches to mortgage credit risk that are now being used in a number of OECD and transition economies. The authors'basic approach is to show how option pricing models can help measure and evaluate the risks of various schemes. They find that mortgage default insurance can be a cost-effective tool for both improving housing affordability and efficiently addressing some of the rationing that characterizes this market. When correctly structured, as it is in a number of transition and market countries, this kind of program can be expected to reduce nonprice rationing at an actuarially fair price. At the same time, considerable care must be exercised in the development of such instruments. Geographical risk diversification, particularly across borders, can play a major role in the success of these programs. Such diversification could be important not only in smaller transition economies but in EU countries as well.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 3047.
Date of creation: 31 May 2003
Date of revision:
Insurance&Risk Mitigation; Banks&Banking Reform; Environmental Economics&Policies; Payment Systems&Infrastructure; Labor Policies; Banks&Banking Reform; Insurance&Risk Mitigation; Housing Finance; Environmental Economics&Policies; Health Economics&Finance;
This paper has been announced in the following NEP Reports:
- NEP-ACC-2004-09-12 (Accounting & Auditing)
- NEP-ALL-2004-08-16 (All new papers)
- NEP-FIN-2004-09-12 (Finance)
- NEP-URE-2004-09-27 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Matteo Iacoviello & Francois Ortalo-Magne, 2002.
"Hedging Housing Risk in London,"
Boston College Working Papers in Economics
539, Boston College Department of Economics.
- Matteo Iacoviello, 2002. "Hedging Housing Risk in London," FMG Discussion Papers dp415, Financial Markets Group.
- François Ortalo-Magné & Matteo Iacoviello, . "Hedging Housing Risk in London," Wisconsin-Madison CULER working papers 02-03, University of Wisconsin Center for Urban Land Economic Research.
- Englund, Peter, 1999. "The Swedish Banking Crisis: Roots and Consequences," Oxford Review of Economic Policy, Oxford University Press, vol. 15(3), pages 80-97, Autumn.
- Karl E. Case & Robert J. Shiller & Allan N. Weiss, 1991. "Index-Based Futures and Options Markets in Real Estate," Cowles Foundation Discussion Papers 1006, Cowles Foundation for Research in Economics, Yale University.
- Quigley, John M. & Van Order, Robert, 1991. "Defaults on mortgage obligations and capital requirements for U.S. savings institutions : A policy perspective," Journal of Public Economics, Elsevier, vol. 44(3), pages 353-369, April.
- George A. Akerlof, 2002.
"Behavioral Macroeconomics and Macroeconomic Behavior,"
American Economic Review,
American Economic Association, vol. 92(3), pages 411-433, June.
- Akerlof, George A., 2001. "Behavioral Macroeconomics and Macroeconomic Behavior," Nobel Prize in Economics documents 2001-4, Nobel Prize Committee.
- Schmidt-Mohr, Udo, 1997. "Rationing versus collateralization in competitive and monopolistic credit markets with asymmetric information," European Economic Review, Elsevier, vol. 41(7), pages 1321-1342, July.
- Karl E. Case & Robert J. Shiller & Allan N. Weiss, 1995.
"Mortgage Default Risk and Real Estate Prices: The Use of Index-Based Futures and Options in Real Estate,"
NBER Working Papers
5078, National Bureau of Economic Research, Inc.
- Robert J. Shiller & Karl E. Case & Allan N. Weiss, 1995. "Mortgage Default Risk and Real Estate Prices: The Use of Index-Based Futures and Options in Real Estate," Cowles Foundation Discussion Papers 1098, Cowles Foundation for Research in Economics, Yale University.
- Maclennan, Duncan & Muellbauer, John & Stephens, Mark, 1999.
"Asymmetries in Housing and Financial Market Institutions and EMU,"
CEPR Discussion Papers
2062, C.E.P.R. Discussion Papers.
- Maclennan, Duncan & Muellbauer, John & Stephens, Mark, 1998. "Asymmetries in Housing and Financial Market Institutions and EMU," Oxford Review of Economic Policy, Oxford University Press, vol. 14(3), pages 54-80, Autumn.
- Jones, Lawrence D, 1993. "Deficiency Judgments and the Exercise of the Default Option in Home Mortgage Loans," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 115-38, April.
- Jaffee, Dwight & Stiglitz, Joseph, 1990. "Credit rationing," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 16, pages 837-888 Elsevier.
- Kau, James B, et al, 1990. "Pricing Commercial Mortgages and Their Mortgage-Backed Securities," The Journal of Real Estate Finance and Economics, Springer, vol. 3(4), pages 333-56, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.