Optimal Mortgage Refinancing: A Closed Form Solution
41 Pages Posted: 15 Oct 2007 Last revised: 13 Dec 2007
There are 2 versions of this paper
Optimal Mortgage Refinancing: A Closed Form Solution
Journal of Money, Credit, and Banking, Forthcoming
Number of pages: 46
Posted: 31 Aug 2007
Last Revised: 07 May 2013
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Date Written: October 2007
Abstract
We derive the first closed-form optimal mortgage refinancing rule. The expression is derived by using the Lambert-W function to solve a tractable class of mortgage refinancing problems. We calibrate our solution and show that our quantitative results closely match those reported by researchers who use numerical methods.
Suggested Citation: Suggested Citation
Agarwal, Sumit and Driscoll, John C. and Laibson, David I., Optimal Mortgage Refinancing: A Closed Form Solution (October 2007). NBER Working Paper No. w13487. Available at SSRN: https://ssrn.com/abstract=1020913
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