 |
English
|
正體中文
|
简体中文
|
Post-Print筆數 : 27 |
Items with full text/Total items : 113648/144635 (79%)
Visitors : 51573703
Online Users : 914
|
|
|
Loading...
|
Please use this identifier to cite or link to this item:
https://nccur.lib.nccu.edu.tw/handle/140.119/61538
|
| Title: | Optimal Mortgage Contract Choice Decision in the Presence of the Pay Option Adjustable Rate and the Balloon Mortgage |
| Authors: | 姜堯民
Chiang, Yao-Min;Sa-Aadu , Jarjisu |
| Contributors: | 財管系 |
| Keywords: | Mortgage choice;balloon mortgages;risk management;household mobility |
| Date: | 2013.01 |
| Issue Date: | 2013-11-08 11:59:44 (UTC+8) |
| Abstract: | The unprecedented run-up in global house prices of the 2000s was preceded by a revolution in U.S. mortgage markets in which borrowers faced a plethora of mortgages to choose from collectively known as nontraditional mortgages (NTMs), whose poor performance helped ignite the global financial crisis in 2007. This paper studies the choice of mortgage contracts in an expanded framework where the menu of contracts includes the pay option adjustable rate mortgage (PO-ARM), and the balloon mortgage (BM), alongside the traditional long horizon fixed rate mortgage (FRM) and the short horizon regular ARM. The inclusion of the PO-ARM is based on the fact it is the most controversial and perhaps the riskiest of the NTMs, whereas the BM has not been analyzed in the literature despite its different risk-sharing arrangement and long vintage. Our inclusive model relates the structural differences of these contracts to the horizon risk management problems and affordability constraints faced by the households that differ in terms of expected mobility. The numerical solutions of the model generates a number of interesting results suggesting that households select mortgage contracts to match their horizon, manage horizon risk and mitigate liquidity or affordability constraints they face. From a risk management and welfare perspectives, we find that the optimal contract for households with shorter horizons, specifically households who expect to move house once every one to two years, is the PO-ARM. The welfare advantage of the PO-ARM diminishes when the household’s horizon extends beyond 2 years at which point the BM becomes the more optimal contract up to 5-year horizon. The FRM is found to be the most suitable contract for relatively sedentary households who expect to move house once every six years and beyond. While the PO-ARM is found to dominate the FRM and BM, the dominance is not absolute. Overall, the results suggest that households are neither as risk averse as the selection of the FRM would suggest, nor are they as risk-seeking as the selection of PO- ARM or regular ARM would suggest. The results also suggest that the exuberance demonstrated for NTMs, especially PO-ARM, during the 2000s mortgage revolution may be both rational and irrational. |
| Relation: | Journal of Real Estate Finance and Economics, 0, 0 |
| Data Type: | article |
| Appears in Collections: | [財務管理學系] 期刊論文
|
Files in This Item:
| File |
Description |
Size | Format | |
|---|
| 000.pdf | | 857Kb | Adobe PDF2 | 1090 | View/Open |
|
All items in 政大典藏 are protected by copyright, with all rights reserved.
|
著作權政策宣告 Copyright Announcement1.本網站之數位內容為國立政治大學所收錄之機構典藏，無償提供學術研究與公眾教育等公益性使用，惟仍請適度，合理使用本網站之內容，以尊重著作權人之權益。商業上之利用，則請先取得著作權人之授權。
The digital content of this website is part of National Chengchi University Institutional Repository. It provides free access to academic research and public education for non-commercial use. Please utilize it in a proper and reasonable manner and respect the rights of copyright owners. For commercial use, please obtain authorization from the copyright owner in advance.
2.本網站之製作，已盡力防止侵害著作權人之權益，如仍發現本網站之數位內容有侵害著作權人權益情事者，請權利人通知本網站維護人員(
nccur@nccu.edu.tw)，維護人員將立即採取移除該數位著作等補救措施。
NCCU Institutional Repository is made to protect the interests of copyright owners. If you believe that any material on the website infringes copyright, please contact our staff(
nccur@nccu.edu.tw). We will remove the work from the repository and investigate your claim.
