Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
962689 | Journal of Housing Economics | 2014 | 14 Pages |
Abstract
We derive an approximate pricing formula for use in reverse mortgage valuation that allows the house price and interest rate to be stochastic with a deterministic distribution of termination time. We compare the results from the approximate pricing formula to a simulation and find that the approximate pricing formula can significantly reduce computational intensity and provide a close approximation to simulation results. The approximation approach enables reverse mortgage holders to undertake complicated portfolio optimization and hedging analyses.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Jing-Tang Tsay, Che-Chun Lin, Larry J. Prather, Richard J. Jr.,