INTEREST RATE RISK HEDGING FOR DUE-ON-SALE MORTGAGES WITH EARLY TERMINATION

The impact of random early termination on the interest rate elasticity and the related implications of hedging a mortgage security are examined. The common approach to computing duration using average mortgage life is shown to be biased and insufficient. Because the prepayment distributions of mortgages tend to have wide dispersions, substantial errors result from using average mortgage life. These results are also applicable to other financial obligations subject to prepayment.     

日本金融改革的经验和教训

日本自1995年以来为改革金融体制进行了诸多尝试,其主题是引入美国式以直接融资为核心的金融制度,发展证券市场,实现由间接金融为主向直接金融为主的转变,同时拓展国际市场.但由于在进行结构调整的同时还要处理巨额的不良贷款,使其改革步履迟滞;更重要的是日本金融业内一直回避竞争,信息披露的透明度低,因此尽管在形式上已具备了美国金融模式的框架,实质上还是以银行为中心的融资体制.迄今为止,改革从总体上看是不成功的.中国的金融结构与日本有类似之处,而且也面临着处理不良贷款的问题.日本的经验教训应对中国金融结构改革有一定的借鉴意义.     

PRICING FAST-PAY MORTGAGES: SOME SIMULATION RESULTS

The mortgage market has undergone rapid change in recent years, particularly in the introduction of alternative mortgage instruments. This paper explores one such instrument, the fast-pay (early equity) mortgage. Specifically, in this paper the focus is on how this type of mortgage would be priced relative to the standard conventional mortgage using historical yield data.