Collateral Risk in Residential Mortgage Defaults
DC Field | Value | Language |
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dc.contributor.author | Yang, Tyler T. | - |
dc.contributor.author | Lin, Che-Chun | - |
dc.contributor.author | Cho, Man | - |
dc.date.available | 2018-12-06T04:44:53Z | - |
dc.date.created | 2017-12-29 | - |
dc.date.issued | 2011-02 | - |
dc.identifier.issn | 0895-5638 | - |
dc.identifier.uri | http://archives.kdischool.ac.kr/kdi_dev/handle/11125/28718 | - |
dc.identifier.uri | 10.1007/s11146-009-9194-y | - |
dc.description.abstract | This paper presents a systematic framework for capturing the collateral-driven mortgage default risk. A forward-looking home price distribution model is developed that explicitly incorporates different sources of volatility in the market value of collateral houses. A consistent and computationally-efficient top-down approach of home price simulation is also introduced. We show that with the proper inclusion of all relevant sources of volatilities, the top-down approach provides close approximation to the results generated by a theoretically sound but computationally demanding bottom-up simulation approach. Using a numerical simulation, we demonstrate that a geographically-diversified mortgage pool entails a substantially lower level of systematic collateral driven mortgage default risk compared to a spatially-concentrated pool. However, the expected default risk is shown to remain unaffected, indicating that the benefit from geographic diversification is only realized through lower risk-based capital requirements, not in lower mortgage insurance premiums. Based on the US state level house price indices, the systematic risk of a state-concentrated mortgage pool is estimated to be about four times higher than that of a nationally-diversified mortgage pool. Our results also show that, among the different volatility components, omitting the cross-sectional dispersion of individual home prices would produce the largest bias in assessing home-price-based mortgage default risk. | - |
dc.language | English | - |
dc.publisher | SPRINGER | - |
dc.subject | TERM STRUCTURE | - |
dc.subject | INTEREST-RATES | - |
dc.subject | PROBABILITIES | - |
dc.subject | TERMINATIONS | - |
dc.subject | MODEL | - |
dc.title | Collateral Risk in Residential Mortgage Defaults | - |
dc.type | Article | - |
dc.identifier.bibliographicCitation | JOURNAL OF REAL ESTATE FINANCE AND ECONOMICS, v.42, no.2, pp.115 - 142 | - |
dc.description.journalClass | 1 | - |
dc.description.isOpenAccess | N | - |
dc.identifier.wosid | 000286660500001 | - |
dc.citation.endPage | 142 | - |
dc.citation.number | 2 | - |
dc.citation.startPage | 115 | - |
dc.citation.title | JOURNAL OF REAL ESTATE FINANCE AND ECONOMICS | - |
dc.citation.volume | 42 | - |
dc.contributor.affiliatedAuthor | Cho, Man | - |
dc.identifier.doi | 10.1007/s11146-009-9194-y | - |
dc.identifier.scopusid | 2-s2.0-79251608323 | - |
dc.type.docType | Article | - |
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