The securitization of fixed-rate mortgages suggests that the FRA/VA market was fully integrated with capital markets by the early l98Os and that the conventional market moved toward integration during the l98Os. Assuming full integration of FHA/VA5 via the GNMA securitization process, we first...

Mortgages, like all debt securities, can be viewed as risk-free assets plus or minus contingent claims that can be usefully viewed as options. The most important options are: prepayment, which is a call option giving the borrower the right to buy back the mortgage at par, and default, which is a...

This paper presents a unified model of the default and prepayment behavior of homeowners in a proportional hazard framework. The model uses the option-based approach to analyze default and prepayment and considers these two interdependent hazards as competing risks. The results indicate the...

Periodic sharp sustained increases and then reversals in asset prices lead many to posit irrational price bubbles. The general case for irrationality is that real asset prices simply have moved too much given the future real cash flows the assets are reasonably likely to produce. A corollary for...

This paper develops evidence that, in a declining market, appraisal values may lag notably behind analytical measures of the discounted present value of commercial property cash flows. For the period 1982-92, alternative measures of the economic value of constant-quality office buildings are...

We begin with a description of three house price panel data sets for the period 1982 to 1991. Next, we estimate a model that assumes the three sources are derived from an underlying unobserved price series, and we construct composite indexes that report house prices for 135 locations. These...

Much progress has been achieved in the valuation of call options and interest-rate caps on default-free mortgages. The evidence suggests that the observed term structure of interest rates (the full structure, not just the end points) and a reasonable estimate of the volatility of spot rates is...

The paper begins with presentation of a methodology for computing rental costs of capital under any tax regime.Tax law over the 1980-84 period is specified and the provisions of theTreasury and Administration tax reform proposals and HR 3838 are described. A model is then constructed to allow...

Possible benefits of tax reform include faster economic growth and greater equity across households. A part of economic growth is the channeling of saving into the most productive real investments. The ability of various tax regimes to channel saving efficiently and independently of the...

The impacts of four major tax reform proposals on the level of interest rates and the allocation of the American capital stock are derived. The four plans are Bradley-Gephardt, Kemp-Kasten, Treasury I and Treasury II. The allocation is among seven types of nonresidential capital, rental housing,...