Journal article
The Pricing of Adjustable Rate Mortgage Contracts
The journal of real estate finance and economics, Vol.2(4), pp.253-266
12/01/1989
DOI: 10.1007/BF00177947
Abstract
This article analyzes the structure of ARM contracts and the pricing of their component features, based on the view of ARMs as a complex "bundle." Unlike previous studies, which have generally relied on option-based simulation techniques, our analysis specifies a microeconomic model of the lender as a profit-maximizer which is then tested using firm-specific data. The empirical results, which are consistent with the microeconomic model, indicate that the lender acts as a profit-maximizing firm in pricing the features of the ARM contract. Furthermore, the results suggest that while the interest-rate cap parameters dominate in the pricing of ARMs, other features are also important. Thus, theoretical and empirical ARM pricing models should embrace other features of the contract besides the cap parameters.
Details
- Title: Subtitle
- The Pricing of Adjustable Rate Mortgage Contracts
- Creators
- J. Sa-Aadu - University of FloridaC. F. Sirmans - Louisiana State University
- Resource Type
- Journal article
- Publication Details
- The journal of real estate finance and economics, Vol.2(4), pp.253-266
- Publisher
- Springer Nature
- DOI
- 10.1007/BF00177947
- ISSN
- 0895-5638
- eISSN
- 1573-045X
- Number of pages
- 14
- Language
- English
- Date published
- 12/01/1989
- Academic Unit
- Finance
- Record Identifier
- 9984380383502771
Metrics
2 Record Views