Optimal Mortgage Refinancing: A Closed Form Solution

41 Pages Posted: 15 Oct 2007 Last revised: 13 Dec 2007

Sumit Agarwal

National University of Singapore

John C. Driscoll

Federal Reserve Board

David Laibson

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

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

Agarwal, Sumit and Driscoll, John C. and Laibson, David, Optimal Mortgage Refinancing: A Closed Form Solution (October 2007). NBER Working Paper No. w13487. Available at SSRN: https://ssrn.com/abstract=1020913

Sumit Agarwal (Contact Author)

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

John C. Driscoll

Federal Reserve Board ( email )

20th and C Streets, NW
Washington, DC 20551
United States

HOME PAGE: http://www.federalreserve.gov/econresdata/john-c-driscoll.htm

David I. Laibson

Harvard University - Department of Economics ( email )

Littauer Center
Room M-14
Cambridge, MA 02138
United States
617-496-3402 (Phone)
617-495-8570 (Fax)

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

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