A Real Option Approach to the Valuation of the Default Risk of Residential Mortgages

A Real Option Approach to the Valuation of the Default Risk of Residential Mortgages

A significant share of many commercial banks’ portfolios consists of residential mortgage loans provided to individuals and families. This paper examines the default and rational prepayment risk of single-borrower (residential) mortgage loans based on an option pricing model that captures the skewne...

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Bibliographic Details
Main Authors: Angela C. De Luna López, Prosper Lamothe-López, Walter L. De Luna Butz, Prosper Lamothe-Fernández
Format: Article
Language:English
Published: MDPI AG 2025-03-01
Series:International Journal of Financial Studies
Subjects:
default risk
debt valuation
residential mortgage
Online Access:https://www.mdpi.com/2227-7072/13/1/31
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