Optimal put exercise: An empirical examination of conditions for mortgage foreclosure

被引:33
作者
Ambrose, BW [1 ]
Capone, CA
Deng, YH
机构
[1] Univ Kentucky, Ctr Real Estate Studies, Lexington, KY 40506 USA
[2] Congressional Budget Off, Washington, DC 20515 USA
[3] Univ So Calif, Sch Policy Planning & Dev, Los Angeles, CA 90089 USA
[4] Univ So Calif, Marshall Sch Business, Los Angeles, CA 90089 USA
关键词
mortgage default; loss severity; option value;
D O I
10.1023/A:1011110501074
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
Implicit in option-pricing models of mortgage valuation are threshold levels of put-option value that must be crossed to induce borrower default. There has been little research into what these threshold values are that come out of pricing models or how they compare to exercised option values seen in empirical data. This study decomposes boundary conditions for optimal default exercise to look at the economic dynamics that should lead to optimal default timing. Empirical data on FHA insured mortgage foreclosures is then examined to discern the predictive influence of optimal-option-valuation-and-exercise variables on observed default timing and values. Interesting results include a new understanding of how to measure and use property equity variables during economic downturns, house-price index ranges over which default is exercised for various classes of borrowers, and implied differences in appreciation rates between market-price indices and foreclosed properties.
引用
收藏
页码:213 / 234
页数:22
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