Reverse Mortgages and Interest Rate Risk
We develop and apply a valuation model that quantifies the interest rate risk inherent in fixed-rate reverse mortgages. Consistent with intuition, our results show that the interest rate risk of a reverse mortgage is greater than that of either a typical coupon bond or a regular mortgage. Somewhat surprisingly, we find that this difference in interest rate risk is extremely large. In fact, the interest rate risk of a reverse mortgage often is several orders of magnitude greater than the interest rate risk of other fixed-income securities. Copyright American Real Estate and Urban Economics Association.
Year of publication: |
1994
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Authors: | Boehm, Thomas P. ; Ehrhardt, Michael C. |
Published in: |
Real Estate Economics. - American Real Estate and Urban Economics Association - AREUEA. - Vol. 22.1994, 2, p. 387-408
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Publisher: |
American Real Estate and Urban Economics Association - AREUEA |
Saved in:
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