Fixed rate mortgages: The cost of interest rate risk aversion

被引：3

作者：

Ahn, Kwangwon ^{[1
,2
]}

Forsyth, Joetta ^{[3
]}

Jang, Hanwool ^{[1
,2
]}

Kim, Dongshin ^{[3
]}

机构：

[1] Yonsei Univ, Dept Ind Engn, 50 Yonsei Ro Seodaemun Gu, Seoul 03722, South Korea

[2] Yonsei Univ, Ctr Finance & Technol, 50 Yonsei Ro Seodaemun Gu, Seoul 03722, South Korea

[3] Pepperdine Univ, Pepperdine Graziadio Business Sch, 24255 Pacific Coast Highway, Malibu, CA 90263 USA

来源：

FINANCE RESEARCH LETTERS | 2022年 / 44卷

基金：

新加坡国家研究基金会;

关键词：

Mortgage; Interest rate risk; Risk aversion; CHOICE;

D O I：

10.1016/j.frl.2021.102158

中图分类号：

F8 [财政、金融];

学科分类号：

0202 ;

摘要：

Mortgages play a significant role in the US economy. Americans predominantly use fixed-rate mortgages (FRMs) to avoid interest rate risk, but the related risk aversion cost has not been analyzed yet. This paper fills the gap by investigating the cost of choosing FRMs over adjustable rate mortgages (ARMs). We find that ex post, FRM borrowers made 12% - 23% higher payments to avoid 0.66% - 1.62% potential ARM payment shocks. Consequently, we introduce and analyze a payment-saving strategy to absorb ARM payment shocks. Emerging data show that ARM borrowers are less financially constrained and less of a concern to policymakers.

引用

页数：8

共 23 条

[1] Modeling stock return distributions with a quantum harmonic oscillator [J].