Callable Bonds and the Mortgage Prepayment Option Video Tutorial
Callable Bonds and the Mortgage Prepayment Option: This lecture is about optimal exercise strategies for callable bonds, which are bonds bundled with an option that allows the borrower to pay back the loan early, if she chooses. Using backward induction, we calculate the borrower’s optimal strategy and the value of the option. As with the simple examples in the previous lecture, the option value turns out to be very large. The most important callable bond is the fixed rate amortizing mortgage; calling a mortgage means prepaying your remaining balance. We examine how high bankers must set the mortgage rate in order to compensate for the prepayment option they give homeowners. Looking at data on mortgage rates we see that mortgage borrowers often fail to prepay optimally.
Please click on the Like button if you liked this video.
Callable Bonds and the Mortgage Prepayment Option - Video Lessons, Tutorials, Ebooks
At SchoolTrainer.com, get access to free study material for Economics in the form of video lessons, tutorials and downloadable ebooks. Not only that; you can get Free Homework Help to get solutions to Economics problems you're stuck with.
We also bring to you interesting stuff like text-books and CD's recommended by teachers and other students that you can buy from trusted online stores to get an extra edge to do well in Economics and other subjects.
Need help with Economics? Get an online Economics tutor to help you with and other areas of .
Register for our online Economics tutoring program to get homework help, help with test preparation and learn from experts to perform well in academics. SchoolTrainer specializes in tutoring for Economics. Our highly qualified Economics tutors can help you with Callable Bonds and the Mortgage Prepayment Option, other Economics homework problems, test preparation and clarification of concepts.
More Free Study Material
- Algebra 1 Study Material
- Arithmetic Study Material
- Biology (College/University Lectures)
- Biology Study Material
- Calculus Study Material
- Chemistry (College/University Lectures)
- Chemistry Study Material
- Computer Science (College/University Lectures)
- Computer Science Study Material
- Cosmology and Astronomy(College/University Lectures)
- Cryptography
- Developmental Math
- Developmental Math 2 Study Material
- Differential Equations Study Material
- Economics (College/University Lectures) – 2
- Geometry Study Material
- HealthCare and Medicine(College/University lectures)
- History Study Material
- Interest and Debt
- Linear Algebra Study Material
- MIT+K12(College University Lectures)
- Organic Chemistry Study Material
- Physics (College/University Lectures)
- Physics Study Material
- Pre Algebra Study Material
- Pre Calculus Study Material
- Probability Study Material
- Statistics Study Material
- Trigonometry Study Material