The Journal of Real Estate Finance and Economics

, Volume 33, Issue 3, pp 183–196 | Cite as

Reduced Form Mortgage Pricing as an Alternative to Option-Pricing Models

  • James B. Kau
  • Donald C. Keenan
  • Alexey A. Smurov


This paper extends the traditional hazard technique of estimating prepayment and default by allowing their baselines to be stochastic processes, rather than known paths of time, as is typically assumed. By working in the reduced form, this method offers an alternative to the empirical valuation of mortgages more easily implemented than the standard structural form approach of options pricing.


Reduced form pricing Mortgage valuation Prepayment Default 


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Copyright information

© Springer Science + Business Media, LLC 2006

Authors and Affiliations

  • James B. Kau
    • 1
  • Donald C. Keenan
    • 2
  • Alexey A. Smurov
    • 2
  1. 1.Department of Insurance, Legal Studies, Real EstateAthensUSA
  2. 2.Department of EconomicsAthensUSA

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