Artikel
What should you pay to cap your ARM? A note on capped adjustable rate mortgages
In this paper, an Adjustable Rate Mortgage (ARM) and a Fixed Rate Mortgage (FRM) are formalized and studied in a simple continuous-time setting under the assumption of a simple one-factor Affine Term Structure (ATS). Through an application of existing results from ATS theory, it is shown that when the short rate reaches a certain pre-determined boundary, the constant payment stream on a new FRM equals the payments on an existing ARM. Hereby, this paper provides a theoretical build-in cap on the formalized ARM. The finite boundary for the short-rate suggests that certain caps on ARMs should (in theory) be offered free of charge.
- Sprache
-
Englisch
- Erschienen in
-
Journal: International Journal of Financial Studies ; ISSN: 2227-7072 ; Volume: 5 ; Year: 2017 ; Issue: 1 ; Pages: 1-10 ; Basel: MDPI
- Klassifikation
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Interest Rates: Determination, Term Structure, and Effects
- Thema
-
capped adjustable rate mortgages
one-factor short rate models
affine term structures
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Nordfang, Maj-Britt
- Ereignis
-
Veröffentlichung
- (wer)
-
MDPI
- (wo)
-
Basel
- (wann)
-
2017
- DOI
-
doi:10.3390/ijfs5010010
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Artikel
Beteiligte
- Nordfang, Maj-Britt
- MDPI
Entstanden
- 2017
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