Mortgage Default and Mortgage Valuation
Download or Read eBook Mortgage Default and Mortgage Valuation PDF written by John Krainer and published by DIANE Publishing. This book was released on 2010-10 with total page 45 pages. Available in PDF, EPUB and Kindle.
| Author | : John Krainer |
| Publisher | : DIANE Publishing |
| Total Pages | : 45 |
| Release | : 2010-10 |
| ISBN-10 | : 9781437933840 |
| ISBN-13 | : 143793384X |
| Rating | : 4/5 (40 Downloads) |
Book Synopsis Mortgage Default and Mortgage Valuation by : John Krainer
Book excerpt: The authors develop an equilibrium valuation model that incorporates optimal default to show how mortgage yields and lender recovery rates on defaulted mortgages depend on initial loan-to-value (LTV) ratios. The analysis treats both the frictionless case and the case in which borrowers and lenders incur deadweight costs upon default. The model is calibrated using data on California mortgages. Given reasonable parameter values, the model does a surprisingly good job fitting the risk premium in the data for high LTV mortgages. Thus, from an ex ante perspective, the authors do not find strong evidence of systematic underpricing of default risk in the run-up to the housing market crisis. Charts and tables.
