Rational Pricing of Adjustable Rate Mortgages

In this paper we develop a general method for valuing adjustable rate mortgages and by producing a set of simulation results, we show that our approach can be implemented. While the simulations are of interest in their own right, we view the approach itself as the major contribution of the paper.

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Bibliographic Details
Published in:AREUEA Journal 1985-07, Vol.13 (2), p.117-128
Main Authors: Kau, James B., Keenan, Donald C., Muller III, Walter J., Epperson, James F.
Format: Article
Language:English
Subjects:
Adjustable rate mortgages
ARM
Economic models
Mathematical analysis
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Partial differential equations
Pricing
Secondary markets
Simulation
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Description
Summary:In this paper we develop a general method for valuing adjustable rate mortgages and by producing a set of simulation results, we show that our approach can be implemented. While the simulations are of interest in their own right, we view the approach itself as the major contribution of the paper.
ISSN:1080-8620
0270-0484
1540-6229
DOI:10.1111/1540-6229.00344