A Comparison of the Reinvestment Risk of the Price Level Adjusted Mortgage and the Standard Fixed Payment Mortgage

Arthur L. Houston

Real Estate Economics, 1988, vol. 16, issue 1, 34-49

Abstract: The purpose of this paper is to increase the understanding of the risk of the indexed mortgage, commonly referred to as the price level adjusted mortgage (PLAM). This is accomplished by comparing, analytically, the reinvestment risk of the PLAM and the standard fixed‐payment mortgage (FPM) under conditions of stochastic inflation and real interest rates. The conclusion is that the PLAM has less reinvestment risk. From the viewpoint of an investor concerned with periodically reinvesting payment streams, the PLAM is the superior mortgage.

Date: 1988
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1111/1540-6229.00442

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:reesec:v:16:y:1988:i:1:p:34-49

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1080-8620

Access Statistics for this article

Real Estate Economics is currently edited by Crocker Liu, N. Edward Coulson and Walter Torous

More articles in Real Estate Economics from American Real Estate and Urban Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().