{"title":"On Non-Negative Equity Guarantee Calculations with Macroeconomic Variables Related to House Prices","authors":"A. Badescu, E. Quaye, R. Tunaru","doi":"10.2139/ssrn.3900697","DOIUrl":null,"url":null,"abstract":"This article investigates the impact of macroeconomic fundamentals on the valuation of non-negative equity guarantee (NNEG) of equity release mortgages. The house price returns are modelled within the family of multiplicative volatility processes using a two-component GARCH-MIDAS model. The pricing framework is constructed based on a general exponential linear pricing kernel, and the risk-neutral dynamics are derived assuming an autoregressive structure for the macroeconomic variables. Our numerical results indicate that the addition of macroeconomic variables improves the predictive performance of the house price returns and have a significant effect on the NNEG valuation.","PeriodicalId":143058,"journal":{"name":"Econometric Modeling: Microeconometric Studies of Health","volume":"476 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2021-08-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"2","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Econometric Modeling: Microeconometric Studies of Health","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.3900697","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 2
Abstract
This article investigates the impact of macroeconomic fundamentals on the valuation of non-negative equity guarantee (NNEG) of equity release mortgages. The house price returns are modelled within the family of multiplicative volatility processes using a two-component GARCH-MIDAS model. The pricing framework is constructed based on a general exponential linear pricing kernel, and the risk-neutral dynamics are derived assuming an autoregressive structure for the macroeconomic variables. Our numerical results indicate that the addition of macroeconomic variables improves the predictive performance of the house price returns and have a significant effect on the NNEG valuation.
京公网安备 11010802042870号
京ICP备2023020795号-1
分享
求助内容：
应助结果提醒方式：
扫码关注我们
