| China has been through a hard time with an aging population. As the social pension system bears more and more pressure, new solutions to support the elderly are urgently needed. Reverse Mortgage provides a fantastic perspective for the problem. And reasonable pricing will play a crucial role in the launch of the product in China.A reverse mortgage is a loan for the seniors used to release the home equity in the property as one lump sum or multiple paymentsl. Pricing is to decide the amount of the payments, which involves a lot of factors.This paper constructs a comprehensive pricing sysytem for Reverse Mortgage, incorperating non-risk factors as initial fixed parameters of the system, and risk factors as changing parameters, whose risks are captured by various dynamic models. Among the risk factors, the volitation of interest rate is described by Jump-Diffusion Model, and housing price growth rate by wavelet neural network model, while for remaining life, this paper adopts actuarial model to calculate.Monte Carlo simulation for empirical test is also conducted using actual data of Shanghai, to present how the pricing system works. The results are analyzed and believed to be reasonable for the risks born by lending institutions, also adequate for improving life quality for the elderly.Overall, the paper does research on a comprehensive pricing model for Reverse Mortgage, trying to solve key issues to the launch of Reverse Mortgage in China, and finally contributing a new perspective for the aging problem. |
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