The Interest Rate Risk of Reverse Mortgages

Zheng HUA, Xikun SU

Abstract


Along with the aging problem, pension problems become a social problem. Reverse mortgage loan is introduced to solve the problem. The elderly get owner-occupied housing mortgages, while the borrowers retain the right to the use of the building. There are many kinds of risks in practice, interest rate risk can not be ignored. Through learning how the interest rate fluctuates, I have simulated the future interest rate fluctuations and analysed the influence of rate on reverse mortgage loan pricing. In the final, I put forward policy recommendations for decentralized interest raterisk.


Keywords


Reverse mortgage; Interest rate risk; Simply jump process; Monte carlo

Full Text:

PDF

References


Boehm, T. P., & Ehrhardt, M. C. (1994). Reverse mortgage and interest rate risk. Journal of American Real Estate and Urban Economics Association, (22), 387-

408.

Mas, K. G., & Lew, K. (2007). Estimating reverse insurers risk using stochastic models (pp.22-27). Conference of Asia-Pacific Risk and Insurance Association.

Mayer, C. J., & Katerina, S. (1994). Reverse mortgages and the liguidity of housing wealth. Journal of the American Real Estate and Urban Economics, (22), 235-255.

Olivia, S. M., & Piggott, J. (2004). Unlocking housing equity in Japan. Journal of the Japanese and International Economies, 18(4), 466-505.

Quiley, J. M. (1991). Real estate prices and economic cycles. International Real Estate Review, (2), 1-20.

Shiuemi, Y. (1995). Asset inflation in selected countries. BOJMonetary and Banking Studies, 13(2), 89-130.

Zimring, S. D. (2004). Housing options for the elderly: Opportunities and challenges. Estate Planning.

Wheatonw. (1999). Real estate “cycles”: Some fundamentals. Real Estate Economics, 27, 209-230.

Wang, L., & Valdez, A. P. (n.d.). Securitization of longevity risk in reverse mortgage. Working Paper.




DOI: http://dx.doi.org/10.3968/n

Refbacks

  • There are currently no refbacks.


Copyright (c) 2016 Management Science and Engineering



Share us to:   

Reminder

  • How to do online submission to another Journal?
  • If you have already registered in Journal A, then how can you submit another article to Journal B? It takes two steps to make it happen:

1. Register yourself in Journal B as an Author

  • Find the journal you want to submit to in CATEGORIES, click on “VIEW JOURNAL”, “Online Submissions”, “GO TO LOGIN” and “Edit My Profile”. Check “Author” on the “Edit Profile” page, then “Save”.

2. Submission

  • Go to “User Home”, and click on “Author” under the name of Journal B. You may start a New Submission by clicking on “CLICK HERE”.


We only use three mailboxes as follows to deal with issues about paper acceptance, payment and submission of electronic versions of our journals to databases:
caooc@hotmail.com; mse@cscanada.net; mse@cscanada.org

 Articles published in Management Science and Engineering are licensed under Creative Commons Attribution 4.0 (CC-BY).

 MANAGEMENT SCIENCE AND ENGINEERING Editorial Office

Address:1055 Rue Lucien-L'Allier, Unit #772, Montreal, QC H3G 3C4, Canada.

Telephone: 1-514-558 6138
Http://www.cscanada.net Http://www.cscanada.org

Copyright © 2010 Canadian Research & Development Centre of Sciences and Cultures