Valuing the Mortgage Borrower's Prepayment Option
用两状态期权定价模型模拟固定利率抵押贷款中提前还款期权的价值，分析其对合同利率的影响，并评估模型高估期权价值的偏差大小。
This paper investigates the value of the prepayment option that normally accompanies a fixed‐rate mortgage. Using the two‐state option‐pricing model developed by Bartter and Rendleman, the paper presents simulations of prepayment option values using several sets of interest rate parameters. The sensitivity of the value of the option to changes in various aspects of the mortgage contract is assessed. Prepayments are not priced separately in the market from the underlying mortgage, so the paper investigates how the inclusion of a prepayment option affects the contract interest rate. Finally, there is reason to believe that any option‐pricing model will overestimate the value of a mortgage prepayment option. The size of this bias is assessed indirectly and is found to be rather small.