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Risk Management and Payout Design of Reverse Mortgages


Daniel Cho, Katja Hanewald and Michael Sherris

We analyse the risk and profitability of reverse mortgages with lump-sum or income stream payments from the lender's perspective. Reverse mortgage cash flows and loan balances are modelled in a multi-period stochastic framework that allows for house price risk, interest rate risk and risk of delayed loan termination.

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