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Mortgage Pricing: Some Provisional Empirical Results

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  • Michael O'Keefe
  • Robert Order

Abstract

We test some of the qualitative properties of mortgage pricing models. The models use option pricing techniques, focusing on prepayment as a call option. They imply a quite nonlinear relationship between mortgage price and coupon, interest rates and volatility. We test for both the first and second derivatives of the effects of these variables using data on Ginnie Mae mortgage backed securities. We find that the model is largely supported by the data. Copyright American Real Estate and Urban Economics Association.

Suggested Citation

  • Michael O'Keefe & Robert Order, 1990. "Mortgage Pricing: Some Provisional Empirical Results," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(3), pages 313-322.
  • Handle: RePEc:bla:reesec:v:18:y:1990:i:3:p:313-322
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/1540-6229.00525
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    Cited by:

    1. Patric H. Hendershott & Herbert M. Kaufman (ary), 1992. "The market for home mortgage credit: recent changes and future prospects," Proceedings, Federal Reserve Bank of St. Louis, pages 99-127.

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