Electronic Resource
Oxford, UK
:
Blackwell Publishing Ltd
Real estate economics
21 (1993), S. 0
ISSN:
1540-6229
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Economics
Notes:
This paper suggests a resolution to the paradox of inefficient risk bearing by adjustable-rate mortgage (ARM) borrowers. The analysis shows that when contracts are written in a realistic way, with payments linked across time via a common loan-rate function, risk sharing and the tilt of the mortgage payment stream become inextricably linked. Unless time preferences are identical or the cost of funds exhibits no time trend, borrowers will accept interest-rate risk in order to gain a more favorable time path of mortgage payments.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/1540-6229.00614
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