ON THE EXISTENCE OF THE ENDOGENOUS MORTGAGE RATE PROCESS
Wed, 15 Feb 2012 10:02:48 GMT
The mortgage rate is a major factor in the refinancing decision. The refinancing behavior influences cash flow and, therefore, mortgage price. The prices of mortgage instruments drives the mortgage rates. We consider a problem of the existence of a dynamic mortgage rate process which resolves this circular dependence. The existence is proved by constructing a solution using a newly proposed level set method.
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