Abstract
A proportional hazards model with competing risks is specified and is extended to correct for the possibility of originator bias. The model is used to examine the ability of option-theoretic models of mortgage pricing to forecast commercial mortgage defaults. Among the findings, those especially of interest include the influence of contemporaneous loan-to-value and debt-service-coverage ratios on commercial mortgage default probabilities. The paper also finds that option-theoretic models of mortgage pricing are quite capable of producing default estimates that fit the actual default rates well, especially when the model is corrected for originator bias.
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Ciochetti, B.A., Deng, Y., Lee, G. et al. A Proportional Hazards Model of Commercial Mortgage Default with Originator Bias. The Journal of Real Estate Finance and Economics 27, 5–23 (2003). https://doi.org/10.1023/A:1023694912018
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DOI: https://doi.org/10.1023/A:1023694912018