Difference between revisions of "Refinancing Incentive"
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== Definition == | == Definition == | ||
'''Refinancing Incentive''' is the economic incentive of a [[Borrower]] to [[Refinance]] an existing borrowing with a new contract. The refinancing incentive is a key driver of [[Prepayment Risk]] | '''Refinancing Incentive''' is the economic incentive of a [[Borrower]] to [[Refinance]] an existing borrowing with a new contract. The refinancing incentive is a key driver of [[Prepayment Risk]] | ||
| + | |||
| + | == Measurement == | ||
| + | The measurement of the refinancing incentive invariably focuses on the net present value ''savings'' obtained when refinancing a loan with an existing applicable interest rate <math>C_0</math> to a new loan at the current rate <math>C_t</math> | ||
[[Category:Prepayment Risk]] | [[Category:Prepayment Risk]] | ||
Revision as of 15:05, 1 December 2022
Definition
Refinancing Incentive is the economic incentive of a Borrower to Refinance an existing borrowing with a new contract. The refinancing incentive is a key driver of Prepayment Risk
Measurement
The measurement of the refinancing incentive invariably focuses on the net present value savings obtained when refinancing a loan with an existing applicable interest rate 
to a new loan at the current rate 
