caa a22 4500 44531673X CHVBK 20180317142650.0 cr unu---uuuuu 170323e20110201xx s 000 0 eng 10.1007/s11146-009-9194-y doi (NATIONALLICENCE)springer-10.1007/s11146-009-9194-y Collateral Risk in Residential Mortgage Defaults [Elektronische Daten] [Tyler Yang, Che-Chun Lin, Man Cho] This paper presents a systematic framework for capturing the collateral-driven mortgage default risk. A forward-looking home price distribution model is developed that explicitly incorporates different sources of volatility in the market value of collateral houses. A consistent and computationally-efficient top-down approach of home price simulation is also introduced. We show that with the proper inclusion of all relevant sources of volatilities, the top-down approach provides close approximation to the results generated by a theoretically sound but computationally demanding bottom-up simulation approach. Using a numerical simulation, we demonstrate that a geographically-diversified mortgage pool entails a substantially lower level of systematic collateral driven mortgage default risk compared to a spatially-concentrated pool. However, the expected default risk is shown to remain unaffected, indicating that the benefit from geographic diversification is only realized through lower risk-based capital requirements, not in lower mortgage insurance premiums. Based on the US state level house price indices, the systematic risk of a state-concentrated mortgage pool is estimated to be about four times higher than that of a nationally-diversified mortgage pool. Our results also show that, among the different volatility components, omitting the cross-sectional dispersion of individual home prices would produce the largest bias in assessing home-price-based mortgage default risk. Springer Science+Business Media, LLC, 2009 Mortgage default risk nationallicence House price volatility nationallicence Diversification benefit nationallicence Default option nationallicence House price index nationallicence Systematic risk nationallicence Geographic concentration nationallicence Yang Tyler IFE Group, 51 Monroe Street, Suite 801, 20850, Rockville, MD, USA aut Lin Che-Chun National Tsing Hua University, 101, Sec. 2, Kuang-Fu Road, 30013, Hsin-Chu, Taiwan, Republic of China aut Cho Man The KDI School of Public Policy and Management, Cheong-Nyang, P.O.Box 184, 130-868, Seoul, Korea aut The Journal of Real Estate Finance and Economics Springer US; http://www.springer-ny.com 42/2(2011-02-01), 115-142 0895-5638 42:2<115 2011 42 11146 https://doi.org/10.1007/s11146-009-9194-y text/html Onlinezugriff via DOI 1 research-article jats NATIONALLICENCE 856 40 https://doi.org/10.1007/s11146-009-9194-y text/html Onlinezugriff via DOI NATIONALLICENCE 700 1- Yang Tyler IFE Group, 51 Monroe Street, Suite 801, 20850, Rockville, MD, USA aut NATIONALLICENCE 700 1- Lin Che-Chun National Tsing Hua University, 101, Sec. 2, Kuang-Fu Road, 30013, Hsin-Chu, Taiwan, Republic of China aut NATIONALLICENCE 700 1- Cho Man The KDI School of Public Policy and Management, Cheong-Nyang, P.O.Box 184, 130-868, Seoul, Korea aut NATIONALLICENCE 773 0- The Journal of Real Estate Finance and Economics Springer US; http://www.springer-ny.com 42/2(2011-02-01), 115-142 0895-5638 42:2<115 2011 42 11146 Metadata rights reserved Springer special CC-BY-NC licence nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-springer