TY  - JOUR
AU  - Hendershott,Patric H.
AU  - Order,Robert Van
TI  - Pricing Mortgages:  An Interpretation of the Models and Results
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2290
PY  - 1988
Y2  - February 1988
UR  - http://www.nber.org/papers/w2290
L1  - http://www.nber.org/papers/w2290.pdf
N1  - Author contact info:
Patric H. Hendershott
Fisher Hall
Ohio State University
2100 Neil Avenue
Columbus, OH 43210
Tel: 218/963-1393
Fax: 218/963-9484
E-Mail: hendershott.2@osu.edu
AB  - 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.
ER  -