The Interest Rate Risk of Reverse Mortgages

Zheng HUA, Xikun SU


Along with the aging problem, pension problems become a social problem. Reverse mortgage loan is introduced to solve the problem. The elderly get owner-occupied housing mortgages, while the borrowers retain the right to the use of the building. There are many kinds of risks in practice, interest rate risk can not be ignored. Through learning how the interest rate fluctuates, I have simulated the future interest rate fluctuations and analysed the influence of rate on reverse mortgage loan pricing. In the final, I put forward policy recommendations for decentralized interest raterisk.


Reverse mortgage; Interest rate risk; Simply jump process; Monte carlo

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