Measuring the economic value of loan advice

Nick Taylor

Economics Letters, 2012, vol. 117, issue 3, 615-618

Abstract: The purpose of this paper is to provide a method by which the economic value of loan advice can be measured. This is achieved by defining advice in terms of the forecasts of future repayments in order to produce a disutility-minimising loan strategy. The economic value of this strategy is then calculated by considering the fee one is willing to pay to avoid switching to a competing strategy during each period. Applying the methodology to UK fixed and variable mortgage rates produces performance fees that are high when advice takes account of the dynamics of repayments. Moreover, the conditions under which these fees are significantly different from zero are identified.

Keywords: Loan advice; Disutility; Performance fees (search for similar items in EconPapers)
JEL-codes: C1 G1 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176512004417
Full text for ScienceDirect subscribers only

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:eee:ecolet:v:117:y:2012:i:3:p:615-618

DOI: 10.1016/j.econlet.2012.08.006

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().