Skip to main content
About HEC About HEC Faculty & Research Faculty & Research Master’s programs Master’s programs MBA Programs MBA Programs PhD Program PhD Program Executive Education Executive Education Summer School Summer School HEC Online HEC Online About HEC Overview Overview Who
We Are Who
We Are
Egalité des chances Egalité des chances HEC Talents HEC Talents International International Campus
Life Campus
Life
Sustainability Sustainability Diversity
& Inclusion Diversity
& Inclusion
Stories Stories The HEC
Foundation The HEC
Foundation
Coronavirus Coronavirus
Faculty & Research Overview Overview Faculty Directory Faculty Directory Departments Departments Centers Centers Chairs Chairs Knowledge Knowledge Master’s programs Master in
Management Master in
Management
Master in
International Finance Master in
International Finance
Specialized
Masters Specialized
Masters
Ecole Polytechnique
-HEC programs Ecole Polytechnique
-HEC programs
Dual-Degree
programs Dual-Degree
programs
Visiting
students Visiting
students
Certificates Certificates Student
Life Student
Life
MBA Programs MBA MBA Executive MBA Executive MBA TRIUM EMBA TRIUM EMBA PhD Program Overview Overview HEC Difference HEC Difference Program details Program details Research areas Research areas HEC Community HEC Community Placement Placement Job Market Job Market Admissions Admissions Financing Financing Executive Education Executive Masters Executive Masters Executive Certificates Executive Certificates Executive short programs Executive short programs Online Online Companies Companies Executive MBA Executive MBA Infinity Pass Infinity Pass Summer School Youth Programs Youth Programs Summer programs Summer programs HEC Online Overview Overview Degree Program Degree Program Executive certificates Executive certificates MOOCs MOOCs Summer Programs Summer Programs
Faculty & Research

The Demand for Long-Term Mortgage Contracts and the Role of Collateral - Lu Liu

20 Oct
2022
2:00 pm
Jouy-en-Josas
English

Participate

Add to Calendar
2022-10-20T14:00:00 2022-10-20T15:00:00 The Demand for Long-Term Mortgage Contracts and the Role of Collateral - Lu Liu Finance Speaker : Lu Liu (Wharton)   Jouy-en-Josas

Finance

Speaker : Lu Liu (Wharton)

 

Long-term fixed-rate mortgage contracts protect households against interest rate risk, yet most countries have short fixation lengths, up to five years. Using administrative data from the UK, this paper shows that the choice of fixation length is affected by the life-cycle dimension of credit risk in the mortgage market: the loan-to-value (LTV) ratio declines and collateral coverage improves over the life of the loan due to principal repayment and house price appreciation. High-LTV borrowers face a trade-off between their demand to insure against repricing and obtaining lower credit spreads over time using shorter-term contracts. To quantify demand for longer-term contracts, I develop a life-cycle model of optimal mortgage fixation choice. With baseline house price growth and interest rate risk, high-LTV households prefer shorter-term contracts, in line with the data.

Click here to download the paper

Participate

Add to Calendar
2022-10-20T14:00:00 2022-10-20T15:00:00 The Demand for Long-Term Mortgage Contracts and the Role of Collateral - Lu Liu Finance Speaker : Lu Liu (Wharton)   Jouy-en-Josas