Title: Simplifying the valuation of reverse annuity mortgages
不動產逆向抵押貸款年金的簡化評價方法
Authors: Jow-Ran Chang
Jing-Tang Tsay
Che-Chun Lin
Keywords: Reverse mortgage;;Annuity;;Option pricing
Issue Date: 1-Jun-2016
Publisher: 交通大學
National Chiao Tung University
Abstract: This research derives an approximate pricing formula for valuing reverse annuity mortgages that allows house prices and interest rates to be stochastic. Our approximation approach reduces computational intensity, because it only requires an expectation (average) and a variance of the termination time. We compare the results from our approximate pricing formula with results from simulations and find that the formula provides a close approximation to the simulation results. We conclude that these approximating formulae are useful in valuing and hedging reverse mortgage portfolios, whereas simulations are computationally prohibitive. We further note that the difference between the results of the approximation formula and the simulation is small and generally less than 1%.
URI: http://hdl.handle.net/11536/137192
ISSN: 1028-7317
Journal: 交大管理學報
Chiao Da Mangement Review
Volume: 36
Issue: 1
Begin Page: 97
End Page: 123
Appears in Collections:Chiao Da Mangement Review


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