Date of this Version
The Journal of Real Estate Finance and Economics
In this paper we offer direct evidence that financial intermediation does impact underlying asset markets. We develop a specific observable symptom of a banking system that underprices the put option imbedded in non-recourse asset-backed lending. Using a dataset for 19 countries and over 500 real estate investment trusts, we find that, following a negative demand shock, the “underpricing” economies experience far deeper asset market crashes than economies in which the put option is correctly priced.
The final publication is available at Springer via http://dx.doi.org/10.1007%2Fs11146-008-9144-0
real estate bubble, mortgage lending put options, Asian financial crisis
Pavlov, A., & Wachter, S. M. (2009). Mortgage Put Options and Real Estate Markets. The Journal of Real Estate Finance and Economics, 38 (1), 89-103. http://dx.doi.org/10.1007/s11146-008-9144-0
Date Posted: 27 November 2017
This document has been peer reviewed.