A Lattice Approach to Pricing Fixed‐Rate Mortgages with Default and Prepayment Options
应用Boyle格点模型为固定利率抵押贷款中的违约和提前还款期权定价，该模型简单高效，能考虑主要交易成本，并估计了不同参数假设下的期权价值。
Existing models on the pricing of default and prepayment options in fixed‐rate mortgages either use numerical methds or they do not consider refinancing or other transaction costs involved in default and prepayment. We provide in this paper an application of the Boyle [1] lattice model to price secured debt with two risky assets. This model is simple, efficient and capable of considering the major types of transaction costs involved in prepayment and default. Using our model, we estimate the option values under a range of assumptions about the underlying parameters. We also provide some comparisons of the lattice model estimates to other models in the literature.