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政大典藏 > College of Commerce > Department of Money and Banking > Periodical Articles > Item 140.119/116395

Please use this identifier to cite or link to this item: https://nccur.lib.nccu.edu.tw/handle/140.119/116395

Title:	Pricing mortgage insurance contracts under housing price cycles with jump risk: evidence from the U.K. housing market
Authors:	林士貴 Chuang, Ming-Che Yang, Wan-Ru Chen, Ming-Chi Lin, Shih-Kuei
Contributors:	金融系
Keywords:	MI contracts;Markov switching model;housing price cycles;jump risks;prepayment risks
Date:	2018
Issue Date:	2018-03-21 17:31:51 (UTC+8)
Abstract:	Previous studies have investigated the determinants of housing price cycles in the housing market; however, we observed the phenomenon of housing price jumps in the 2007 subprime crisis. This paper presents a discussion on the housing price cycle and abnormal price jumps to describe the behavior of housing prices in the United Kingdom. The empirical results show that the impact factors of housing cycles are market risk and the switching factor. Furthermore, the impact factors of jump risks include the bursting of the housing bubble and financial crises. Therefore, in this paper, we employ the Markov switching model with jump risks to value the MI contracts and analyze the influences of housing price cycles, jump risks, risks of market interest rate, and the prepayment risks on MI premiums. The results of sensitivity analysis show that more volatile housing price index returns, as well as longer periods of higher volatility in housing prices, raise MI premiums. Moreover, the MI premium is positively related to the absolute value of the average jump amplitude and the shock frequency of abnormal events. There is the tradeoff between the market interest rate and the prepayment risk. The influences of market interest rate are different on MI premium with/without prepayment risks.
Relation:	EUROPEAN JOURNAL OF FINANCE, 24(11), 909-943
Data Type:	article
DOI link:	https://doi.org/10.1080/1351847X.2017.1359199
DOI:	10.1080/1351847X.2017.1359199
Appears in Collections:	[Department of Money and Banking] Periodical Articles

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