Valuing Fixed Rate Mortgage Loans with Default and Prepayment Options

Abstract

We introduce some new independent variables to the standard prepayment-default modeling literature.The following subsection describes these novel independent variables. Discussion is separated into two groups; factors included into both equations, and factors contained only

Liquidity and Value in the Deep vs. Shallow Ends of Mortgage-Backed Securities Pools

“…To improve the validity of a cross-security comparison of small and large trades, we introduce controls for different security characteristics and estimate a predicted pay-up model (reported in Table A-4) incorporating factors motivated by Dunsky and Ho (2007) and Stein et al (2011). After controlling for potential differences between the securities typically traded in small trade sizes and the securities typically traded in large trade sizes, we find again strong size effects on specified-pool prices (see Table A -5).…”

Sustainable Construction and Financing—Asset-Backed Securitization of Expressway’s Usufruct with Redeemable Rights

“…The pricing of asset-backed securitization products has been mainly used to analyze the expected cash flow that the asset pool will generate in the future. The present value of the asset-backed securities has obtained by predicting the future interest rate path and discounting the expected cash flow [7]. Jacob et al [8] defined two independent stochastic processes for the risk-free interest rate and the net operating income of the underlying assets, which extends the default mortgage pricing model.…”

The Marginal Effect of First-Time Homebuyer Status on Mortgage Default and Prepayment

“…In contrast to mortgage default, mortgage prepayment has been modeled as the exercise of the "call option" by the borrower in the literature including, Dunsky & Ho (2007) and Goodstein (2014). Borrowers refinance their mortgages when the benefit of doing so exceeds cost, i.e.…”