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作者

来源

JOURNAL OF REAL ESTATE FINANCE AND ECONOMICS,Vol.58,Issue1,P.133-157

语言

英文

关键字

Ambiguity aversion; Mortgage insurance premium; Market incompleteness; Pricing kernel; Housing assets; G1; G2; SPECIFICATION ERRORS; ROBUST-CONTROL; DEFAULT RISK; MODEL; VALUATION; MARKET; UNCERTAINTY; CONTRACTS; AVERSION; IMPACT

作者单位

[Chen, Chang-Chih] Jiangxi Normal Univ, Int Ctr Financial Res, Nanchang, Jiangxi, Peoples R China. [Chang, Chia-Chien] Natl Kaohsiung Univ Appl Sci, Dept Finance, Kaohsiung, Taiwan. Chang, CC (reprint author), Natl Kaohsiung Univ Appl Sci, Dept Finance, Kaohsiung, Taiwan. E-Mail: bra19810910@yahoo.com.tw; cchiac@kuas.edu.tw

摘要

This paper studies how ambiguity aversion affects the pricing of mortgage insurance (MI). We consider pricing-kernel ambiguity arising from market incompleteness. This ambiguity model is applied to a standard framework of MI-ML (mortgage loan) structural pricing. Our quantitative results show that insurers' ambiguity aversion generates substantial positive effects on MI premium. Ambiguity impacts are highly sensitive to loan-to-value ratio, ambiguity magnitude, and the tightness of information constraints. By using the U.S. city-level housing and mortgage data, we estimate that, on average, ambiguity aversion increases MI premium rate by 77% (46bps), and explains about 60-90% of pricing errors.