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Determinants of GNMA Mortgage Prices
Author(s) -
Brennan Michael J.,
Schwartz Eduardo S.
Publication year - 1985
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00351
Subject(s) - issuer , treasury , yield curve , economics , arbitrage , interest rate , yield (engineering) , bond , financial economics , floating interest rate , commercial mortgage backed security , monetary economics , econometrics , actuarial science , finance , mortgage insurance , geography , materials science , archaeology , casualty insurance , metallurgy , insurance policy
This paper contrasts three different arbitrage‐based models for the pricing of GNMA securities, and analyzes the effect of different assumptions about the call policy pursued by the issuers of the underlying mortgages. Both the nature of the interest‐rate uncertainty captured by the model and the assumed call policy have a major effect on the yield differentials predicted between GNMA securities and Treasury Bonds.