An Overview of the Option-Theoretic Pricing of Mortgages

By J. Kau, Donald C. Keenan. 2001

248 citations recorded by the source corpus.

View Paper: https://www.semanticscholar.org/paper/9baee09910e2c9a34ea0fc1c588c8d54a28d143e

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Citations in the corpus

• Unemployment, Negative Equity, and Strategic Default (2013, background): “and Kau and Keenan [1995]).”
• Can't Pay or Won't Pay? Unemployment, Negative Equity, and Strategic Default (2018, background): ““Won’t pay” households can afford the mortgage payment but treat the mortgaged property as a call option to repurchase the home for the outstanding balance on the mortgage, as in Kau and Keenan [1995]. Using standard option pricing techniques, the “won’t pay” households default if the value of the c”
• Home Is Where the Equity Is: Mortgage Refinancing and Household Consumption (2004, background): “Chen and Ling (1989) and Kau and Keehan (1995) extended this approach by developing contingent claims frameworks embodying a dynamic model of the decision to refinance.”
• The Delinquency of Subprime Mortgages (2005, unknown): “Kau and Kim (1994) theorized that when prices are volatile borrowers may wait longer to default, because the value of the option to default may be larger in the future.”
• Subprime outcomes: risky mortgages, homeownership experiences, and foreclosures (2007, background): “…which is difficult to define formally, let alone quantify.10 8The FOM model of Kau, Keenan and Kim applied the contingent claims framework of Black and Scholes (1973), Cox, Ingersoll, and Ross (1985), and Epperson et al. See Kau and Keenan (1995) for a survey of the mortgage pricing literature.”
• The Effect of Conforming Loan Status on Mortgage Yield Spreads: A Loan Level Analysis (2004, background): “Kau and Keenan (1995) show that under appropriate assumptions, the value of the mortgage (VM) will satisfy the following partial differential equation (PDE):”
• Limits of Arbitrage: Theory and Evidence from the Mortgage-Backed Securities Market (2007, unknown): “11 The first eigenvector accounts for 83% of the variance which suggests that equation (15) is a good representation of the data.”
• The Panic of 2007 (2008, background): “See Kau and Keenan (1995) for a review.”