Optimal Mortgage Refinancing: A Closed Form Solution
41 Pages Posted: 15 Oct 2007 Last revised: 13 Dec 2007
Date Written: October 2007
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.
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