This study advances the mortgage insurance pricing literature by providing theory and methods for incorporating both equity and ability to-pay theories (Jackson and Kasserman, 1980). We develop a new option-based model by adding the current loan-to-value and debt service ratios to the pricing...

This paper builds a static contingent-claim model that allows for examining the optimal capital structure with the joint arguments of counterparty default risk and market incompleteness. A first-passage-time model with jump default barrier is adopted to capture the counterparty effects on the...

Housing price jump risk and the subprime crisis have drawn more attention to the precise estimation of mortgage insurance premiums. This study derives the pricing formula for mortgage insurance premiums by assuming that the housing price process follows the jump diffusion process, capturing...