IDEAS home Printed from https://ideas.repec.org/a/kap/jrefec/v24y2002i3p239-60.html
   My bibliography  Save this article

Frictions, Heterogeneity and Optimality in Mortgage Modeling

Author

Listed:
  • Kau, James B
  • Slawson, V Carlos, Jr

Abstract

The purpose of this article is to provide a unified framework for incorporating frictions into a theoretical options-pricing model (OPM) for mortgages. This article presents formulation for a frictions-adjustable mortgage model that integrates borrower heterogeneity while simultaneously preserving prepayment and default financial decisions. Our model demonstrates the flexibility of the OPM by simulating separate and concurrent effects of three categories of frictions on the mortgage and mortgage components. Researchers can use our example formulation to determine the effects of specific borrower characteristics on mortgage values without destroying the options theoretic framework. Copyright 2002 by Kluwer Academic Publishers

Suggested Citation

  • Kau, James B & Slawson, V Carlos, Jr, 2002. "Frictions, Heterogeneity and Optimality in Mortgage Modeling," The Journal of Real Estate Finance and Economics, Springer, vol. 24(3), pages 239-260, May.
  • Handle: RePEc:kap:jrefec:v:24:y:2002:i:3:p:239-60
    as

    Download full text from publisher

    File URL: http://journals.kluweronline.com/issn/0895-5638/contents
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    2. Asabere, Paul K & Huffman, Forrest E & Mehdian, Seyed, 1994. "The Adverse Impacts of Local Historic Designation: The Case of Small Apartment Buildings in Philadelphia," The Journal of Real Estate Finance and Economics, Springer, vol. 8(3), pages 225-234, May.
    3. Kanemoto, Yoshitsugu, 1988. "Hedonic Prices and the Benefits of Public Projects," Econometrica, Econometric Society, vol. 56(4), pages 981-989, July.
    4. Scotchmer, Suzanne, 1986. "The short-run and long-run benefits of environmental improvement," Journal of Public Economics, Elsevier, vol. 30(1), pages 61-81, June.
    5. Peter V. Schaeffer & Cecily Ahern Millerick, 1991. "The Impact of Historic District Designation on Property Values: An Empirical Study," Economic Development Quarterly, , vol. 5(4), pages 301-312, November.
    6. Coulson, N Edward & Bond, Eric W, 1990. "A Hedonic Approach to Residential Succession," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 433-444, August.
    7. David E. Clark & William E. Herrin, 1997. "Historical Preservation Districts and Home Sale Prices: Evidence from the Sacramento Housing Market," The Review of Regional Studies, Southern Regional Science Association, vol. 27(1), pages 29-48, Summer.
    8. Paul K. Asabere & Forrest E. Huffman, 1991. "Historic Districts and Land Values," Journal of Real Estate Research, American Real Estate Society, vol. 6(1), pages 1-8.
    9. Deborah Ann Ford, 1989. "The Effect of Historic District Designation on Single-Family Home Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(3), pages 353-362.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mikhail Chernov & Brett R. Dunn & Francis A. Longstaff, 2016. "Macroeconomic-Driven Prepayment Risk and the Valuation of Mortgage-Backed Securities," NBER Working Papers 22096, National Bureau of Economic Research, Inc.
    2. Sanders, Anthony B. & Slawson, V. Jr., 2005. "Shared appreciation mortgages: Lessons from the UK," Journal of Housing Economics, Elsevier, vol. 14(3), pages 178-193, September.
    3. Sanders, Anthony B. & Slawson, V. Carlos, Jr., 2005. "Shared Appreciation Mortgages: Lessons from the UK," Working Paper Series 2005-16, Ohio State University, Charles A. Dice Center for Research in Financial Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jrefec:v:24:y:2002:i:3:p:239-60. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.