A Study on the Main Determination of Mortgage Risk: Evidence from Reverse Mortgage Markets

Chien-Chiang Lee (), Kuo-Shing Chen and David So- De Shyu

International Journal of Financial Research, 2015, vol. 6, issue 2, 84-94

Abstract: The main determination of mortgage risk factors is undoubtedly related to the housing price. In this article, we employ threshold GARCH process in practical analysis, to capture the house price dynamic on the logarithm return. This study also estimates the housing price volatility in the presence of stationary variance property from the threshold GARCH model and its implied volatility can serve as a benchmark for the pricing reverse mortgage derivatives. Our results have important implications for hedging risk of reverse mortgages. To our best knowledge, this paper is the first study employing Poisson Regression approach to look at the housing prices risk of reverse mortgage incorporated with its number of loans.

Keywords: reverse mortgages; poisson regression; threshold GARCH; housing price process (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:6:y:2015:i:2:p:84-94

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