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Rational Pricing of Adjustable Rate Mortgages

Author

Listed:
  • James B. Kau
  • Donald C. Keenan
  • Walter J. Muller
  • James F. Epperson

Abstract

In this paper we develop a general method for valuing adjustable rate mortgages and by producing a set of simulation results, we show that our approach can be implemented. While the simulations are of interest in their own right, we view the approach itself as the major contribution of the paper.

Suggested Citation

  • James B. Kau & Donald C. Keenan & Walter J. Muller & James F. Epperson, 1985. "Rational Pricing of Adjustable Rate Mortgages," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 13(2), pages 117-128, June.
  • Handle: RePEc:bla:reesec:v:13:y:1985:i:2:p:117-128
    DOI: 10.1111/1540-6229.00344
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    File URL: https://doi.org/10.1111/1540-6229.00344
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    Cited by:

    1. Robert J. Shiller & Rafal M. Wojakowski & M. Shahid Ebrahim & Mark B. Shackleton, 2017. "Continuous Workout Mortgages: Efficient Pricing and Systemic Implications," Cowles Foundation Discussion Papers 3016, Cowles Foundation for Research in Economics, Yale University.
    2. Eddie Lam, 2002. "A Risk Management Model for MBS Issuers," International Real Estate Review, Asian Real Estate Society, vol. 5(1), pages 169-195.
    3. Patric H. Hendershott & Robert Van Order, 1987. "Pricing Mortgages: An Interpretation of the Models and Results," NBER Working Papers 2290, National Bureau of Economic Research, Inc.
    4. Shiller, Robert J. & Wojakowski, Rafal M. & Ebrahim, M. Shahid & Shackleton, Mark B., 2019. "Continuous Workout Mortgages: Efficient pricing and systemic implications," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 244-274.
    5. Patric H. Hendershott, 1986. "Mortgage Pricing: What Have We Learned So Far?," NBER Working Papers 1959, National Bureau of Economic Research, Inc.
    6. Eduardo S. Schwartz & Walter N. Torous, 1991. "Caps on Adjustable Rate Mortgages: Valuation, Insurance, and Hedging," NBER Chapters, in: Financial Markets and Financial Crises, pages 283-304, National Bureau of Economic Research, Inc.

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