caa a22 4500 477129811 CHVBK 20180405111701.0 cr unu---uuuuu 170330e19970501xx s 000 0 eng 10.1023/A:1007776111175 doi (NATIONALLICENCE)springer-10.1023/A:1007776111175 Bias in an Empirical Approach to Determining Bond and Mortgage Risk Premiums [Elektronische Daten] [PAUL CHILDS, STEVEN OTT, TIMOTHY RIDDIOUGH] Empirical studies of bond and commercial mortgage performance often quantify a required risk premium by examining the difference between the promised yield and the realized yield as adjusted for default occurrence. These studies omit the effects of various other sources of risk, however, including collateral asset market risk, interest rate risk, and possibly call risk. These omissions downwardly bias the empirical risk premium estimate on the debt. In this paper, we disentangle and quantify the sources of this bias by modeling secured coupon debt (the commercial mortgage) as used in the calculation of a realized investment return. We consider deterministic and stochastic interest rate economies with mortgage contracts that are either noncallable or subject to a temporary prepayment lockout period. Given realistic parameter values associated with the term structure, underlying asset dynamics, and debt contracting, we show that the magnitude of the bias can be significant. Kluwer Academic Publishers, 1997 debt valuation nationallicence option pricing nationallicence default risk nationallicence mortgage default nationallicence CHILDS PAUL Finance Area, College of Business and Economics, University of Kentucky, 40506-0034, Lexington, KY aut OTT STEVEN Finance Area, College of Business and Economics, University of Kentucky, 40506-0034, Lexington, KY aut RIDDIOUGH TIMOTHY Department of Urban Studies and Planning, Center for Real Estate, Massachusetts Institute of Technology, 02139-4307, Cambridge, MA aut The Journal of Real Estate Finance and Economics Kluwer Academic Publishers 14/3(1997-05-01), 263-282 0895-5638 14:3<263 1997 14 11146 https://doi.org/10.1023/A:1007776111175 text/html Onlinezugriff via DOI 1 research-article jats NATIONALLICENCE 856 40 https://doi.org/10.1023/A:1007776111175 text/html Onlinezugriff via DOI NATIONALLICENCE 700 1- CHILDS PAUL Finance Area, College of Business and Economics, University of Kentucky, 40506-0034, Lexington, KY aut NATIONALLICENCE 700 1- OTT STEVEN Finance Area, College of Business and Economics, University of Kentucky, 40506-0034, Lexington, KY aut NATIONALLICENCE 700 1- RIDDIOUGH TIMOTHY Department of Urban Studies and Planning, Center for Real Estate, Massachusetts Institute of Technology, 02139-4307, Cambridge, MA aut NATIONALLICENCE 773 0- The Journal of Real Estate Finance and Economics Kluwer Academic Publishers 14/3(1997-05-01), 263-282 0895-5638 14:3<263 1997 14 11146 Metadata rights reserved Springer special CC-BY-NC licence nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-springer