A market consistent approach to the valuation of no-negative equity guarantees and equity release mortgages

Buckner, D; Dowd, K; Hulley, H

A market consistent approach to the valuation of no-negative equity guarantees and equity release mortgages

Buckner, D Dowd, K Hulley, H

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Publisher:: CAMBRIDGE UNIV PRESS
Publication Type:: Journal Article
Citation:: Journal of Demographic Economics, 2023, 89, (3), pp. 349-372
Issue Date:: 2023-09-10

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Field	Value	Language
dc.contributor.author	Buckner, D
dc.contributor.author	Dowd, K
dc.contributor.author	Hulley, H https://orcid.org/0000-0002-6684-8309
dc.date.accessioned	2024-01-17T05:42:15Z
dc.date.available	2024-01-17T05:42:15Z
dc.date.issued	2023-09-10
dc.identifier.citation	Journal of Demographic Economics, 2023, 89, (3), pp. 349-372
dc.identifier.issn	2054-0892
dc.identifier.issn	2054-0906
dc.identifier.uri	http://hdl.handle.net/10453/174705
dc.description.abstract	This paper provides a new market consistent approach to the valuation of no negative equity guarantees and equity release mortgages. The paper provides a new approach to the estimation of volatility inputs. The proposed approach to volatility produces a volatility term structure that is dependent on the age and gender of the borrower. Illustrative valuations are provided based on the Black '76 put pricing formula and mortality projections based on the M5 Cairns-Blake-Dowd mortality model. Results show interesting ramifications for industry practice and prudential regulation.
dc.language	English
dc.publisher	CAMBRIDGE UNIV PRESS
dc.relation.ispartof	Journal of Demographic Economics
dc.relation.isbasedon	10.1017/dem.2023.6
dc.rights	info:eu-repo/semantics/openAccess
dc.subject	14 Economics
dc.subject.classification	Economics
dc.subject.classification	3801 Applied economics
dc.subject.classification	3802 Econometrics
dc.subject.classification	3803 Economic theory
dc.title	A market consistent approach to the valuation of no-negative equity guarantees and equity release mortgages
dc.type	Journal Article
utslib.citation.volume	89
utslib.for	14 Economics
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	open_access	*
dc.date.updated	2024-01-17T05:42:14Z
pubs.issue	3
pubs.publication-status	Published
pubs.volume	89
utslib.citation.issue	3

Abstract:

This paper provides a new market consistent approach to the valuation of no negative equity guarantees and equity release mortgages. The paper provides a new approach to the estimation of volatility inputs. The proposed approach to volatility produces a volatility term structure that is dependent on the age and gender of the borrower. Illustrative valuations are provided based on the Black '76 put pricing formula and mortality projections based on the M5 Cairns-Blake-Dowd mortality model. Results show interesting ramifications for industry practice and prudential regulation.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/174705