The Variable-Rate Mortgage and Risk in the Mortgage Market: An Option Theory Perspective: Note

摘要: An important public policy debate in recent years has centered around ways to reduce risks the mortgage market. The most significant proposal this area been eliminate Regulation Q and allow more widespread use of variable-rate mortgages [ 1, 4, 5, 8, 9, 10, 13] . purpose paper is analyze nature thrift institutions mortgagors. In regard we find that framework theory options provides considerable insight into problem its possible solutions. A (VRA1) a long-term loan contract carries an effective rate changes periodically sympathy with market rates interest [4, 9]. This change can be implemented by variation monthly payment (variable payment), number fixed payments maturity), or both; our discussion will employ second.l savings association (SL 2. denomination intermediation (joining mostly small deposits large mortgages); 3. default risk less risky 4. maturity short-term fixed-rate 5. mortgages). issue under currently involves allowing S&Ls residen-