Mortgage Prepayment Behavior in a Market with ARMs only

A study on the prepayment behavior of Hong Kong mortgage loans is conducted. With all of the loans as adjustable-rate mortgages (ARMs), we find that 1) Prepayment speeds up and then slows down as the mortgage seasons; 2) Prepayment speeds up as the rate markup decreases; 3) Prepayment speeds up as the interest rate increases; 4) Prepayment speeds up when the profitability ratio of the banks ( the prime-HIBOR spread) is higher; 5) Prepayment speeds up as the price of the property market falls; 6) Prepayment speed is faster for loans with a lower loan-to-value ratio; 7) Prepayment exhibits a seasonal pattern: people tend to prepay in the summer.Prepayment function, Adjustable-rate mortgages, Proportional-hazard model

Cascading failures in coupled networks with both inner-dependency and inter-dependency links

We study the percolation in coupled networks with both inner-dependency and inter-dependency links, where the inner- and inter-dependency links represent the dependencies between nodes in the same or different networks, respectively. We find that when most of dependency links are inner- or inter-ones, the coupled networks system is fragile and makes a discontinuous percolation transition. However, when the numbers of two types of dependency links are close to each other, the system is robust and makes a continuous percolation transition. This indicates that the high density of dependency links could not always lead to a discontinuous percolation transition as the previous studies. More interestingly, although the robustness of the system can be optimized by adjusting the ratio of the two types of dependency links, there exists a critical average degree of the networks for coupled random networks, below which the crossover of the two types of percolation transitions disappears, and the system will always demonstrate a discontinuous percolation transition. We also develop an approach to analyze this model, which is agreement with the simulation results well.Comment: 9 pages, 4 figure