Valuing Mortgage Insurance Contracts in Emerging Market Economies

Posted: 22 Aug 2005

See all articles by Ashok Bardhan

Ashok Bardhan

University of California, Berkeley - Haas School of Business

Rasa Karapandza

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting; New York University (NYU) - New York University Abu Dhabi

Branko Urosevic

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Abstract

We develop a new option-based method for the valuation of mortgage insurance contracts in closed form in an economy where agents are risk neutral. While the proposed valuation method is general and can be used in any market, it may be particularly useful in emerging market economies where other existing methods may be either inappropriate or are too difficult to implement because of the lack of relevant data. As an application, we price a typical Serbian government-backed mortgage insurance contract.

Keywords: Mortgage insurance, default rate, prepayment rate, Black-Scholes formula, emerging markets

Suggested Citation

Bardhan, Ashok and Karapandza, Rasa and Urosevic, Branko, Valuing Mortgage Insurance Contracts in Emerging Market Economies. Journal of Real Estate Finance and Economics, Vol. 32, No. 1, 2006, Available at SSRN: https://ssrn.com/abstract=782264

Ashok Bardhan (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

Rasa Karapandza

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

New York University (NYU) - New York University Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates

Branko Urosevic

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
34-93-542-2590 (Phone)

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