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Korean J Financ Stud > Volume 46(5); 2017 > Article
Korean Journal of Financial Studies 2017;46(5):1061-1088.
DOI: https://doi.org/10.26845/KJFS.2017.12.46.5.106    Published online December 31, 2017.
A Study on the Determination of Non-Recourse Mortgage Rate
Bongjoon Kim, Doobae Jun
비소구 주택담보대출 금리 산정에 관한 연구
김봉준, 전두배
경상대학교
Abstract
Non-recourse mortgage is a loan product that allows lenders to claim only the collateral when the debtor is in default. Therefore, the debtor can protect his income and assets by exercising non-recourse right. This implies that non-recourse mortgage rate must be bigger than recourse mortgage rate as much as the value of non-recourse right. Non-recourse right can be comprehended as a kind of American-type put option with its exercise price the loan balance of the mortgage. This study estimates the non-recourse mortgage rate using American and Bermuda option pricing models and identifies factors affecting the additional interest rate due to non-recourse right. Our empirical results are summarized as follows.
First, as the price volatility of mortgage collateral and the loan to value (LTV) ratio as its exercise price increased, the additional interest rate increased exponentially. This indicates that the price volatility of basis asset and LTV ratio are the most influential factors. The additional interest rate increased gradually according to the loan maturity and also increased linearly in proportion to the recourse mortgage rate. Second, we introduced the exogenous variable of default delay level to the Bermuda option model and then estimated the strategic default delay level which made the Bermuda option value equal to the American option value of non-recourse right. From the result, we found that unless the intrinsic value of put option was bigger than 10% of the loan balance, it was advantageous to hold the option right than to exercise it. Also, we found that the delay of default was strengthened as the price volatility of basis asset increased. Third, we estimated additional interest rates using real estate data in South Korea. As the result, we found that additional interest rates were relatively high in Gangnam area of Seoul on the location, in large-sized houses on the scale, and in apartments on the type of house.
Key Words: 비소구 담보대출,가산금리,풋옵션,부도유예수준,소구권,Non-Recourse Mortgage Loan,Additional Interest,Put Option,Default Delay Level,Recourse Right


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