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dc.contributor.authorAgarwal, Sumit
dc.contributor.authorDriscoll, John D.
dc.contributor.authorLaibson, David I.
dc.date.accessioned2012-11-16T16:07:02Z
dc.date.issued2012
dc.identifier.citationAgarwal, Sumit, John D. Driscoll, and David I. Laibson. Forthcoming. Optimal mortgage refinancing: a closed form solution. Journal of Money, Credit, and Banking.en_US
dc.identifier.issn0022-2879en_US
dc.identifier.urihttp://nrs.harvard.edu/urn-3:HUL.InstRepos:9918811
dc.description.abstractWe derive the first closed-form optimal refinancing rule: Refinance when the current mortgage interest rate falls below the original rate by at least \(\frac{1}{ψ}\)[φ + W (− exp (−φ))]. In this formula W(.) is the Lambert W-function, ψ = \(\frac{2 (ρ + λ)}{σ}\), φ = 1 + ψ (ρ + λ)\(\frac{κ/M}{(1 − τ )}\), ρ is the real discount rate, λ is the expected real rate of exogenous mortgage repayment, σ is the standard deviation of the mortgage rate, κ/M is the ratio of the tax-adjusted refinancing cost and the remaining mortgage value, and τ is the marginal tax rate. This expression is derived by solving a tractable class of refinancing problems. Our quantitative results closely match those reported by researchers using numerical methods.en_US
dc.description.sponsorshipEconomicsen_US
dc.language.isoen_USen_US
dc.publisherThe Ohio State Universityen_US
dash.licenseOAP
dc.subjectmortgageen_US
dc.subjectrefinanceen_US
dc.subjectoption valueen_US
dc.subjectnormative economicsen_US
dc.titleOptimal Mortgage Refinancing: A Closed Form Solutionen_US
dc.typeJournal Articleen_US
dc.description.versionAccepted Manuscripten_US
dc.relation.journalJournal of Money, Credit, and Bankingen_US
dash.depositing.authorLaibson, David I.
dc.date.available2012-11-16T16:07:02Z
dc.identifier.doi10.3386/w13487
dash.contributor.affiliatedLaibson, David


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