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Time Series Analysis of Mortgage Rate Insurance

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Actuarial Science

Part of the book series: The University of Western Ontario Series in Philosophy of Science ((WONS,volume 39))

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Abstract

A Mortgage Rate Protection Plan was introduced effective March 1,1984 by the federal government of Canada. Under the plan, mortgage borrowers could, in exchange for payment of a single premium, insure themselves against the risk of large increases in their monthly mortgage payment. It is shown in this paper that the SARIMA model (1 • Ф1 B 12)(1 • ø1 B)1 • B)z t = a t satisfactorily represents monthly interest rate data z t . An expression for the appropriate insurance premium is derived, and comparisons are made with the premium actually being charged by CMHC.

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References

  • Abraham, B., and J. Ledolter (1983), Statistical Methods for Forecasting. New York: Wiley and Sons.

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  • Box, G. E. P., and G. M. Jenkins (1978), Time Series Analysis, Forecasting and Control. San Francisco: Holden-Day.

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  • Buser, S. A., and P. H. Hendershott (1984), “The pricing of default-free mortgages”. Working paper, National Bureau of Economic Research, Cambridge, Massachusetts.

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  • McLeod, A. I. (1978), “Manual for the TS package”. Mimeograph, Department of Statistics and Actuarial Sciences, University of Waterloo.

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Author information

Authors and Affiliations

  1. Department of Statistics and Actuarial Science, University of Waterloo, Waterloo, Ontario, N2L 3G1, Canada

    Keith P. Sharp

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  1. Keith P. Sharp
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Editor information

Editors and Affiliations

  1. Department of Statistical and Actuarial Sciences, The University of Western Ontario, Canada

    Ian B. MacNeill , Gary J. Umphrey , Beda S. C. Chan  & Serge B. Provost , ,  & 

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© 1987 D. Reidel Publishing Company, Dordrecht, Holland

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Sharp, K.P. (1987). Time Series Analysis of Mortgage Rate Insurance. In: MacNeill, I.B., Umphrey, G.J., Chan, B.S.C., Provost, S.B. (eds) Actuarial Science. The University of Western Ontario Series in Philosophy of Science, vol 39. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-4796-2_15

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  • DOI: https://doi.org/10.1007/978-94-009-4796-2_15

  • Publisher Name: Springer, Dordrecht

  • Print ISBN: 978-94-010-8627-1

  • Online ISBN: 978-94-009-4796-2

  • eBook Packages: Springer Book Archive

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