Pricing Adjustable Rate Mortgages

34 Pages Posted: 25 Jun 2004 Last revised: 27 Mar 2021

See all articles by Patric H. Hendershott

Patric H. Hendershott

University of Aberdeen - Centre for Property Research; National Bureau of Economic Research (NBER)

Date Written: 1985

Abstract

This paper provides a framework for pricing adjustable rate mortgages and summarizes some evidence on the prices (additions to the coupon rate) necessary to cover expected losses from binding of varios interest rate caps and from mortgage default and foreclosure. Both interst rate and default risk are shown to be heavily inluenced by the form of the mortgage instrument as well as the underlying drift and uncertainty in interest rates and house prices.

Suggested Citation

Hendershott, Patric H., Pricing Adjustable Rate Mortgages (1985). NBER Working Paper No. w1548, Available at SSRN: https://ssrn.com/abstract=336303

Patric H. Hendershott (Contact Author)

University of Aberdeen - Centre for Property Research ( email )

Aberdeen AB24 2UF
Scotland

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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