Economics, Econometrics and Finance
6 years ago

Mortgage-backed securities value impacted by real estate investor behavior.

Journal of the Asian Real Estate Society
Pricing Mortgage-Backed Securities-First Hitting Time Approach
Jing-Tang Tsay, Che-Chun Lin, Jerry T. Yang

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The article presents a new way to price mortgage-backed securities (MBSs) by considering how borrowers decide to refinance their loans. They found that MBS value is influenced by factors like loan-to-value ratio, house price volatility, and the proportion of real estate investors. Interestingly, MBS value can increase when mortgages last longer, even with higher house price volatility. This model offers a quicker and more accurate way to price MBSs compared to other methods.