Optimal Mortgage Refinancing: A Closed Form Solution
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NBER Working Paper No. 13487
Issued in October 2007
NBER Program(s): AP EFG PE
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.
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