Working Paper: NBER ID: w13487
Authors: Sumit Agarwal; John C. Driscoll; David Laibson
Abstract: We derive the first closed-form optimal mortgage refinancing rule. The expression is derived by using the Lambert-W function to solve a tractable class of mortgage refinancing problems. We calibrate our solution and show that our quantitative results closely match those reported by researchers who use numerical methods.
Keywords: No keywords provided
JEL Codes: G11; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| current mortgage interest rate (E43) | refinancing decision (G51) |
| interest rate differential (E43) | refinancing decision (G51) |
| real discount rate, expected real rate of mortgage repayment, standard deviation of mortgage rate, marginal tax rate (E43) | refinancing decision (G51) |