Lancaster EPrints

Continuous Workout Mortgages

Shiller, Robert J. and Wojakowski, Rafal and Ebrahim, Shahid and Shackleton, Mark (2011) Continuous Workout Mortgages. National Bureau of Economic Research (NBER) working paper. ISSN 0898-2937

Full text not available from this repository.

Abstract

Continuous Workout Mortgage (CWM) balance and payments are indexed using market-observable house price index in an economic environment with prepayments. Our main results include: (a) explicit modelling of repayment and interest-only CWMs; (b) closed form formulas for mortgage payment and mortgage balance of a repayment CWM; (c) a closed form formula for the actuarially fair mortgage rate of an interest-only CWM. For repayment CWMs we extend our analysis to include two negotiable parameters: adjustable "workout proportion" and adjustable "workout threshold." These results are of importance as they not only help in the understanding of the mechanics of CWMs and estimating key contract parameters, but they also provide guidance on how to enhance the resilience of the financial architecture and mitigate systemic risk.

Item Type: Article
Journal or Publication Title: National Bureau of Economic Research (NBER) working paper
Uncontrolled Keywords: Continuous Workout Mortgage ; Insurance ; Real estate ; Pricing ; House prices ; household finance ; Price bubble ; Case-Shiller house price index ; Annuity ; Continuous time finance ; Subprime solution ; Finance and the Good Society
Subjects:
Departments: Lancaster University Management School > Accounting & Finance
ID Code: 53123
Deposited By: ep_importer_pure
Deposited On: 09 Mar 2012 03:00
Refereed?: No
Published?: Published
Last Modified: 09 Apr 2014 23:02
Identification Number:
URI: http://eprints.lancs.ac.uk/id/eprint/53123

Actions (login required)

View Item