Waiting to Default: The Value of Delay

James Kau () and Taewon Kim

Real Estate Economics, 1994, vol. 22, issue 3, 539-551

Abstract: This paper analyzes the opportunity for early termination of a mortgage contract. We consider the possibility of defaulting on the property and explore the rules that are used by a value‐maximizing borrower in exercising this option to default. The discussion centers on the value of waiting to make such a decision and the consequences of this rational inertia. We show that the observed delay in default usually attributed to transaction costs can instead be explained as entirely rational choice in a dynamic environment.

Date: 1994
References: Add references at CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
https://doi.org/10.1111/1540-6229.00648

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:22:y:1994:i:3:p:539-551

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 ().