FNMA Mortgage Purchase Commitments As Put Options: An Empirical Examination
作者:
Thomas D. Berry,
Adam K. Gehr,
期刊:
Real Estate Economics
(WILEY Available online 1985)
卷期:
Volume 13,
issue 1
页码: 93-106
ISSN:1080-8620
年代: 1985
DOI:10.1111/1540-6229.00343
出版商: Blackwell Publishing Ltd
数据来源: WILEY
摘要:
The Federal National Mortgage Association (FNMA) auctions commitments to purchase mortgages. An examination of the terms of the commitment contract shows that these commitments are actually put options on mortgages. The contract is unusual, however, in that the price of the commitment is a fixed percentage of the value of the mortgages. In the auction, the dealers effectively bid the exercise price at which they would be willing to pay the fixed commitment price.In this paper, we study the economics of the FNMA auction. We use a two‐state approximation to the American put pricing model for interest‐dependent securities to examine the behavior of the auction results. We find that the model performs reasonably well for several years — giving results which are, on the average, correct — and then, quite abruptly, the performance of the model deteriorates. Some possible reasons for this result are then e
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