NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Pricing Mortgages: An Interpretation of the Models and Results

Patric H. Hendershott, Robert Van Order

NBER Working Paper No. 2290 (Also Reprint No. r1006)
Issued in June 1987
NBER Program(s):   ME

Mortgages, like all debt securities, can be viewed as risk-free assets plus or minus contingent claims that can be usefully viewed as options. The most important options are: prepayment, which is a call option giving the borrower the right to buy back the mortgage at par, and default, which is a put option giving the borrower the right to sell the house in exchange for the mortgage. This paper reviews and interprets the large and growing body of literature that applies recent results of option pricing models to mortgages. We also provide a critique of the models and suggest directions for future research.

download in pdf format
   (478 K)

download in djvu format
   (370 K)

email paper

This paper is available as PDF (478 K) or DjVu (370 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w2290

Published: From Journal of Financial Services Research, Vol. 1, No. 1, pp. 19-55,(October 1987).

Users who downloaded this paper also downloaded these:
Campbell and Cocco w17516 A Model of Mortgage Default
Hendershott and Order w2847 Integration of Mortgage and Capital Markets and the Accumulation of Residential Capital
Longstaff w10422 Optimal Recursive Refinancing and the Valuation of Mortgage-Backed Securities
Hendershott w1959 Mortgage Pricing: What Have We Learned So Far?
Deng, Quigley, and Order w5184 Mortgage Default and Low Downpayment Loans: The Costs of Public Subsidy
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us