Pricing Adjustable Rate Mortgages

Patric Hendershott

No 1548, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides a framework for pricing adjustable rate mortgages and summarizes some evidence on the prices (additions to the coupon rate) necessary to cover expected losses from binding of varios interest rate caps and from mortgage default and foreclosure. Both interst rate and default risk are shown to be heavily inluenced by the form of the mortgage instrument as well as the underlying drift and uncertainty in interest rates and house prices.

Date: 1985-01
Note: ME
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Published as Hendershott, Patric H "Pricing Adjustable-Rate Mortgages." Solving the Menu Problem, Proceedings of the Tenth Annual Conference, pp. 99-119. San Francisco: Federal Home Loan Bank of San Francisco1985.

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