Unlocking the Secrets of Mortgage Behavior: How Options Shape Homeownership
The study looked at why people with mortgages choose to pay them off early or default. They found that using a simple model based on options can help explain this behavior, but it's not the whole story. It's important to consider both options at the same time. They also discovered that there are different types of borrowers with mortgages, and not taking this into account can lead to mistakes in predicting how people will pay off their loans.