The Research On Reverse Mortgage Pricing Which Based On The Theory Of Option

Now China’s aging population problem is serious and the number of China’s elderly population aged over 60 has reached 212 million at the end of 2014,which accounts for 15.4% of the total population.Meanwhile our country’s pension gap problem is also serious,which goes an increasing trend. In order to solve the pension problem, the Chinese government early in 2013 has proposed reverse mortgage,and its purpose is to allow Chinese residents put the self-government pension ways to ease the pressure in terms of the social pension. However,whether or not successfully expanding reverse mortgage in the country depends largely on pricing. On the reverse mortgage for a reasonable price will help to improve the direction of mortgage housing initiative of the participating parties,thus contributing to the smooth implementation of housing reverse mortgage loan. This article is in this background of our reverse mortgage pricing research.Reverse mortgage pricing will be affected by many factors,including longevity risk,interest rate risk,the risk of house price fluctuations,adverse selection and moral hazard. When considering these risks,what we should do first is to organize and summarize the theory of these risks so as to search for effective ways to reduce these risks. Meanwhile.as pricing would be reflected by the risks referred above,we must make the risks more actual in the possess of reverse mortgage pricing.In the process of processing, we made a fit dealing and estimates on the historical data of the existing home prices as well as the interest rates,and in accordance with that,we made a prediction on the future.We also made a prediction on the remaining life according to the Chinese insurance industry experience which is in the use of life-cycle table law of large numbers and the central dogma budget.Meanwhile,we measured adverse selection and moral hazard problems by the correlation coefficient between the different mortgage room.By analysing and comparing the existing payment factor pricing, actuarial pricing and option pricing, we think that option theory is the fit way for reverse mortgage pricing. When making Pricing analysis,we use the data of Qingdao and Wenzhou’s second-hand housing sales price index. And at the sane time,combined with the principle of breakeven,we make the pricing on the two model:lump sum payment and an annuity payment.And the two modes of payment of the amount drawn on the pricing model is validated while each of the variables affecting the control variable method of reverse mortgage initial price of such houses, houses expected appreciation rate of house price volatility, interest rate, risk-free interest rate, remaining life, adverse selection and moral hazard were sensitive test and analysis. Through reverse mortgage pricing and verification, and with the current level of our overall revenue, we believe that the promotion of the implementation of housing reverse mortgage loan can effectively improve the quality of life and health of the elderly, which will help alleviate our current serious problem of population aging.The main contribution of this paper are:(1) Combined with the actual situation we analyze the feasibility and necessity of housing reverse mortgages. We also introduce the theory of reverse mortgage systematically and provide effective support in theory. (2) By considering the option theory and the breakeven theory,we made reverse mortgage pricing and empirical analysis combined with Qingdao and Wenzhou’s second-hand housing sales price index data.And we solve a conclusion that obtained by the anti-housing Mortgage loans can be effective to improve the living standards of the conclusion of the elderly, and which also promote the reverse mortgage promotion in China.