Akahori, J, Constantinescu, C, Imamura, Y and Pham, HH
(2022)
An application of risk theory to mortgage lending.
SCANDINAVIAN ACTUARIAL JOURNAL, 2022 (5).
pp. 447-469.
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Abstract
Inspired by the double-debt problem in Japan where the mortgagor has to pay the remaining loan even if their house was destroyed by a catastrophic event, we model the lender's cash flow, by an exponential functional of a renewal-reward process. We propose an insurance add-on to the loan repayments and analyse the asymptotic behavior of the distribution of the first hitting time, which represents the probability of full repayment. We show that the finite-time probability of full loan repayment converges exponentially fast to the infinite-time one. In a few concrete scenarios, we calculate the exact form of the infinite-time probability and the corresponding premiums.
Item Type: | Article |
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Uncontrolled Keywords: | Exponential functional, renewal-reward process, ruin probability, double-debt problem, Fredholm integro-differential equation, stochastic fixed-point equation |
Depositing User: | Symplectic Admin |
Date Deposited: | 28 Sep 2020 07:50 |
Last Modified: | 18 Jan 2023 23:31 |
DOI: | 10.1080/03461238.2021.1995781 |
Open Access URL: | https://www.tandfonline.com/doi/full/10.1080/03461... |
Related URLs: | |
URI: | https://livrepository.liverpool.ac.uk/id/eprint/3102631 |