Default risk of wage-indexed payment mortgage in Turkey

Erol, Işıl
Patel, K
This paper analyses default risk of wage-indexed payment mortgage (WIPM) in Turkey in comparison with other standard mortgage contracts originated in high inflationary economies. Emlak Bank launched WIPM linked to Civil Service employees' wage (CSW) index during high inflationary period of late 1990s. Concurrently, the government introduced a policy linking CSW index to semi-annual expected rate of inflation in an attempt to facilitate housing finance for the fastest growing sector of the population. We find that WIPM protects borrowers against risk of high payment shocks whereas nominal contracts such as ARM and DIM would have resulted in high mortgage defaults. (c) 2005 Elsevier Inc. All rights reserved.


Computation of Hedging Coefficients for Mortgage Default and Prepayment Options: Malliavin Calculus Approach
YILMAZ, BİLGİ; Kestel, Sevtap Ayşe (2019-11-01)
This study explores the hedging coefficients of the financial options to default and to prepay embedded into mortgage contracts based on the change in spot rate, underlying house price and its volatility. In the computations, the finite-dimensional Malliavin calculus is applied since the distribution of both options is unknown and their payoffs are non-differentiable. Naturally, the hedging coefficients are obtained as a product of option's payoff and an independent weight, which permits the user to derive ...
Exchange rate pass-through to domestic prices in Turkish economy
Alper, Koray; Gaygısız Lajunen, Esma; Department of Economics (2003)
In this study, determinants and the evolution of the exchange rate passthrough to domestic inflation in the Turkish economy is analyzed. The analyses cover the 1987-2003 period. In the analyses, single equation أError Correction Modelsؤ are used to estimate the exchange rate pass-through. Estimation results suggest that alike other emerging countries, the degree of exchange rate passthrough to domestic prices is high and the pass-through is completed in a very short time span. Estimations results also indic...
Originating long-term fixed-rate Mortgages in developing economies: New evidence from Turkey
Erol, Işıl; Çetinkaya, Özgenay (Orta Doğu Teknik Üniversitesi (Ankara, Turkey), 2009-12-1)
This paper intends to analyze the recent developments to introduce and integrate mortgage markets into capital markets of Turkey. The Capital Market Board has recently prepared a legal framework not only for a proper mortgage system, but also for the eventual securitization of these mortgages. Turkish banks started to contract, for the first time ever, long-term fixed rate mortgages. The paper uses traditional option-pricing model to evaluate the current 10-year fixed rate mortgage (FRM) contracts with embe...
Asset-backed stable numeraire approach for sustainable valuation
Aydin, Nadi Serhan; Rainer, Martin (2020-05-01)
Interest rates underpin almost every instrument/transaction in conventional financial markets. Valuation of the instruments in relation to interest rates remains meaningful only ifcashcan be attributed a worth of its own (which is generally assumed to accumulate over time). The relevant concepts such as the stochastic short rate and the conventional numeraire (i.e. the money market account) not only become restrictive when one attempts to build more realistic models in quantitative finance, but also - as we...
Credit Risk Market and the Recent Loan Profile in the Turkish Banking Sector
Özdemir, Özlem (2009-05-01)
Very little research has been done on the financial stability implications of credit risk transfer markets. In particular there is a paucity of work considering the interactions between the various credit risk transfer markets or instruments. Regarding credit derivatives, the small number of existing studies can be explained by a lack of quantitative data and by the brief history of the market" (Kiff et al., 2002, page 2). This paper tries to explain the development of credit risk transfer instruments and h...
Citation Formats
I. Erol and K. Patel, “Default risk of wage-indexed payment mortgage in Turkey,” JOURNAL OF HOUSING ECONOMICS, pp. 271–293, 2005, Accessed: 00, 2020. [Online]. Available: