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The demand for long-term mortgage contracts and the role of collateral

Liu, Lu - 2023

Long-term fixed-rate mortgage contracts protect households against interest rate risk, yet most countries have … fixation length tracks the life-cycle decline of credit risk in the mortgage market: the loan-to-value (LTV) ratio decreases … using shorter-term contracts. To quantify demand for long-term contracts, I develop a life-cycle model of optimal mortgage …

Persistent link: https://www.econbiz.de/10014309040

Pricing Mortgages : Endogenous Interest Rate and Leverage

Peng, Liang - 2016

mortgage contract, in which differences in the borrower and the lender's risk preference jointly determine the equilibrium … commercial mortgage data provide generally supporting evidence for the predictions, and the evidence on counter-cyclical leverage …

Persistent link: https://www.econbiz.de/10012997615

The Inevitability of Market-Wide Underpricing of Mortgage Default Risk

Pavlov, Andrey D.; Wachter, Susan M. - 2012

Lenders are frequently accused of mispricing the put option imbedded in non-recourse lending (Herring and Wachter, 1999 and 2003). Prior research (Pavlov and Wachter, 2004) shows one lender's incentives to underprice. Here we identify the conditions for a market-wide underpricing equilibrium. We...

Persistent link: https://www.econbiz.de/10014057396

Mortgages denominated in domestic and foreign currencies : simple models

Király, Júlia; Simonovits, András - 2015

After the short temporary popularity of foreign currency denominated (FXD) loans, during the Great Financial and Economic Recession (2007- 2013), the burden of these loans has become unaffordable for a lot of borrowers in East Central Europe. We have designed a family of simple models to compare...

Persistent link: https://www.econbiz.de/10010481775

Bank Loans Pricing and Basel II : A Multi-Period Risk-Adjusted Methodology Under the New Regulatory Constraints

Curcio, Domenico - 2011

Under the new Basel II regulatory framework, the need for an effective risk-adjusted pricing mechanism has become even more central in banking than in the past: banks are spurred to develop risk-adjusted measures, to avoid wasteful customers' cross-subsidization and support the value creation...

Persistent link: https://www.econbiz.de/10013131209

Liquidation value and loan pricing

Barbiero, Francesca; Schepens, Glenn; Sigaux, Jean-David - 2022

We show that the liquidation value of collateral depends on who is pledging it. We employ transaction-level data on overnight repurchase agreements (repo) and loan-level credit registry data on corporate loans. We find that borrowers on the repo market pay a 2.6 basis points rate premium when...