Abstract

http://ssrn.com/abstract=1285517
 
 

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Mortgage Put Options and Real Estate Markets


Andrey D. Pavlov


Simon Fraser University (SFU) - Finance Area

Susan M. Wachter


University of Pennsylvania - Wharton School, Department of Real Estate

October 16, 2008

Journal of Real Estate Finance and Economics, Vol. 38, No. 1, 2009

Abstract:     
In this paper we offer direct evidence that financial intermediation does impact underlying asset markets. We develop a specific observable symptom of a banking system that underprices the put option imbedded in non-recourse asset-backed lending. Using a dataset for 19 countries and over 500 real estate investment trusts, we find that, following a negative demand shock, the "underpricing" economies experience far deeper asset market crashes than economies in which the put option is correctly priced.

Keywords: real estate bubble, mortgage lending put options, Asian financial crisis

JEL Classification: G21

Accepted Paper Series


Not Available For Download

Date posted: October 20, 2008  

Suggested Citation

Pavlov, Andrey D. and Wachter, Susan M., Mortgage Put Options and Real Estate Markets (October 16, 2008). Journal of Real Estate Finance and Economics, Vol. 38, No. 1, 2009. Available at SSRN: http://ssrn.com/abstract=1285517

Contact Information

Andrey D. Pavlov (Contact Author)
Simon Fraser University (SFU) - Finance Area ( email )
Burnaby, British Columbia V5A 1S6
Canada
604 291 5835 (Phone)
604 291 4920 (Fax)
Susan M. Wachter
University of Pennsylvania - Wharton School, Department of Real Estate ( email )
The Wharton School
3620 Locust Walk
Philadelphia, PA 19104-6330
United States
215-898-6355 (Phone)

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