This paper studies a household's optimal demand for a reverse mortgage. These contracts allow homeowners to tap their … home equity to finance consumption needs. In stylized frameworks, we show that the decision to enter a reverse mortgage is … reduces the risky portfolio share and is more likely to enter a reverse mortgage. On the other hand, if there is a large drop …

fluctuation and households' liquid portfolio choice. To isolate exogenous variation in homeowners' home equity and mortgage debt … elasticity of risky asset shares with respect to mortgage debt and home equity is -0.31 and 0.28 respectively in pre …-crisis period. On the other hand, whereas for the post-crisis period, the elasticity of risky asset shares with respect to mortgage …