Browsing by Author "Barata, Marco Paulo Pedro"
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- Pricing of Reverse Mortgages : an application exercise to the portuguese market : does it make sense?Publication . Barata, Marco Paulo Pedro; Cadete, Joaquim António PereiraPricing Reverse Mortgages (RM) is particularly challenging for loan providers, especially due to the uncertainty related with termination timing and the volatility of economic variables such as interest rates and house prices. When a no negative equity guarantee is offered, as Reverse Mortgages do, these variables are the ones that most significantly impact the size of the losses and the timing on termination for the lenders. This Master Thesis studies the risks that a lenders faces when providing this type of loan and the pricing of RMs applied to the Portuguese case, by estimating the house price and the required reverse mortgage interest rate when considering a RM annuity and a RM lump sum.