Reduced Form Mortgage Pricing as an Alternative to Option-Pricing Models

James B. Kau (), Donald Keenan () and Alexey Smurov

The Journal of Real Estate Finance and Economics, 2006, vol. 33, issue 3, pages 183-196

Abstract: This paper extends the traditional hazard technique of estimating prepayment and default by allowing their baselines to be stochastic processes, rather than known paths of time, as is typically assumed. By working in the reduced form, this method offers an alternative to the empirical valuation of mortgages more easily implemented than the standard structural form approach of options pricing. Copyright Springer Science + Business Media, LLC 2006

Keywords: Reduced form pricing; Mortgage valuation; Prepayment; Default (search for similar items in EconPapers)
Date: 2006
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Persistent link: http://EconPapers.repec.org/RePEc:kap:jrefec:v:33:y:2006:i:3:p:183-196

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