Valuation Of Non-negative Equity Guarantee Under The Contagion Risk For House Price

In recent years,the value of non-negative equity guarantees(NNEGs)has become an important research topic at home and abroad.In this paper,the contagion effect of regional house prices is added to the real estate price process,and the longevity risk is taken into consideration.Using martingale pricing method,the initial value model of non-negative equity guarantees is constructed,and the pricing problem of NNEGs under different environments is solved.This paper mainly does the following three aspects:First of all,the contagion effect of regional house prices is added to the real estate price process,and the influence of longevity risk is considered,so the CBD mortality model is introduced to describe the housing exit probability.Therefore,the pricing problem of non-negative asset guarantee considering dual risks based on the HJM term structure of interest rate is studied.Secondly,when studying the value of NNEGs based on the CBD mortality model under the effect of house price contagion,this paper assumes that the house price follows the Merton-jump diffusion model,and then expands it to use the CEVjump model to describe the house price volatility,better reflect the real estate price volatility smile in the financial market,and obtain the analytical solutions under different models.Finally,through numerical simulation and comparative analysis,the influence of contagion effect and longevity risk is compared and explained.The results show that:(1)ignoring the influence of contagion effect will underestimate the value cost of NNEGs;(2)Ignoring the impact of longevity risk will overestimate the value cost of NNEGs.