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Evaluation of methods for determining the credit risk premium for mortgages

Tigchelaar, Roel (2014) Evaluation of methods for determining the credit risk premium for mortgages.

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Abstract:ABN AMRO Mortgage Group (AAHG) is responsible for a substantial Dutch mortgage portfolio. One of the most important processes is determining the mortgage interest rate. This involves defining the cost price components of this rate. A correct assessment of the cost price leads to a fair price distribution within the different customer risk categories and a prudent measure of risk. The credit risk element of this cost price must be calculated in a reliable way. It is therefore important that the method that leads to this risk assessment is justified on a sound basis. The central problem in this research is therefore defined as finding the best method for determining the credit risk component in the mortgage interest rate. A framework containing four methods is identified for deriving credit risk. After analysis of the theoretical validity of the models, it seems that two models are considered reliable enough to come to the right risk price assessment.
Item Type:Essay (Master)
ABN AMRO Hypotheek Groep
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Industrial Engineering and Management MSc (60029)
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