1、本科毕业论文外文翻译 外文题目： Household Interest Rate Risk Management 出 处： REAL ESTATE ECONOMICS 作 者： Otto Van Hemert 原 文： I investigate household interest rate risk management by solving a life-cycle asset allocation model that includes mortgage and bond portfolio choice. I find that most investors prefer an ad
2、justable-rate mortgage and thereby save on the bond risk premium that is contained in fixed-rate mortgage payments. Only older, risk-averse investors hold some fixed-rate mortgage debt. Together with a position in short-term bonds this enables them to hedge against changes in the real interest rate,
3、 while the inflation exposure of the debt and bond positions cancel out. Hedging house price changes with bonds only occurs at the end of the life cycle. Early in the life cycle short-sale constraints prevent an effective hedge. Many households have large financial positions that are exposed to inte
4、rest ate risk. To finance the purchase of a house, households typically take out a mortgage loan, with monthly payments either fixed in nominal terms or tied to the short-term interest rate. In addition, many households hold bonds, both directly and indirectly in a pension account. This article addr
5、esses the question of how to optimally invest in financial assets, including the mortgage and bond portfolio choice. To this end I study a dynamic life-cycle model where investors optimize over the housing and portfolio choice. I combine the main model features of two recent strands in the portfolio
6、 choice literature. First, I follow Cocco (2005) and Yao and Zhang (2005a,b) by explicitly modeling the housing decision and incorporating a stochastic labor income stream Households derive utility from both housing and other goods consumption. They acquire housing services by either renting or owni
7、ng the house they live in. Investors can change their housing tenure and size only at a transaction cost, resulting in infrequent, endogenously generated house moves. Both the house and human capital have a major impact on the investors willingness and ability to take risk in his or her financial po
8、rtfolio. Cocco (2005) and Yao and Zhang (2005a,b) assume constant interest rates, do not consider bonds and do not allow for a choice between different mortgage types. Consequently these papers do not address a households interest rate risk management. Second, this article follows Campbell and Vicei
9、ra (2001) and Brennan and Xia (2002) by incorporating bonds in the financial portfolio. Nominal bonds are priced by a two-factor model for the term structure of interest rates with expected inflation and real interest rate as factors. Unlike Campbell and Viceira (2001) and Brennan and Xia (2002), I
10、model labor income, housing and mortgages, and I am therefore able to study the life-cycle pattern in households interest rate risk management and the optimal mortgage choice. Renters choose how to allocate financial wealth to stocks, 3-year bonds, 10-year bonds and cash. Negative positions are prec
11、luded. Homeowners also choose the mortgage type and size. A homeowner may take out a mortgage loan up to the market value of the house minus a down payment. I allow for an adjust able rate mortgage (ARM), a fixed-rate mortgage (FRM) and a combination of the two (hybrid mortgage). A homeowner can adj
12、ust his or her mortgage type and size at zero cost. The ARM is modeled as a negative cash position. The FRM is modeled as a negative position in the 10-year bond. While this is a simplification from actual FRMs offered in the United States, it captures the essence that the present value of the FRM p
13、ayments is subject to interest rate risk. To keep the model tractable, I abstract from a prepayment option and declining maturity for FRMs. The parameter values for the asset price dynamics are calibrated to U.S. data and partially based on estimates by De Jong, Driessen and Van Hemert (2007). In ac
14、cordance with Brennan and Xia (2002) and Campbell and Viceira (2001), the mean reversion in the real interest rate is found to be faster than the mean reversion in the expected inflation rate. I show that this implies that a portfolio consisting of a positive position in a short-term bond and a nega
15、tive position in a long-term bond can be constructed with the property that it has a negative exposure to real interest rate shocks and a zero exposure to expected inflation rate shocks. The most novel insights come from the optimal portfolio choice over the life cycle. In the first 10 years of adul
16、t life, investors have very little wealth compared to the value of their human capital. This creates a desire to leverage risk taking in the financial portfolio, and borrowing and short-sale restrictions are binding. On the asset side of the household balance sheet the investor prefers to predominan
17、tly invest in the assets with the highest associated risk premium, which are stocks. On the liability side of the household balance sheet if the investors owns a house he or she optimally finances the house with an ARM and thereby saves on the bond risk premium associated with an FRM. An investor wh
18、o suboptimally chooses to finance his or her house with an FRM incurs large utility losses. The investor chooses the maximum allowed mortgage loan size to obtain the highest-possible leverage. As the investor approaches his or her 40s, the financial portfolio still consists mainly of stocks, but the
19、re is also a small holding of 10-year bonds. This 10-year bond position hedges against real interest rate changes. The expected real return on housing and financial wealth equals the real interest rate plus a constant risk premium, hence the real interest rate summarizes the investment opportunities
20、. The investor prefers the 10-year bond to the 3-year bond for this hedge because it has a higher risk premium. As more wealth is accumulated between age 40 and 65 and human capital is further capitalized, the hedge demand against falling real interest rates increases and the desire for a leveraged
21、stock exposure decreases. For a more risk-tolerant investor, this results in increasing 10-year bond holdings. In contrast, a more risk-averse investor gradually switches to 3-year bonds between age 55 and 65. The reason for this difference is two fold. First the more risk-tolerant investor is more
22、willing to bear the expected inflation risk of the 10-year bond and thereby reap the associated risk premium. Second, a more risk-tolerant investor has larger stock holdings, leaving her with less financial wealth to construct a hedge portfolio against falling interest rates, which in turn induces her to invest in the bond with the largest exposure to real interest rate, which is the 10-year bond.
