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The Excess Risk Premium Considered

The Index Mortgage seeks to capture (accumulate) this excess premium and apply it to the benefit of the borrower, in the form of a reduced loan interest rate  …

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Back-Testing The Index Mortgage

Back-testing demonstrated a high likelihood (approximately 97%) that any given Index Mortgage would prove a better choice than its equivalent traditional counterpart …

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Simulating The Index Mortgage

Back-testing inheres that values for the model variables are known (i.e. are a historical fact). This raises the obvious issue that there is only one known past, whereas there are many possible futures …

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Monte Carlo Simulation Explained

Monte Carlo simulation is named after the city, famous for its casino.  Although there are earlier examples of similar techniques having been engaged, the modern instantiation of the method dates from the Manhattan Project …

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Index Versus Offset Mortgage

In this paper we compare the economics of the Index Mortgage with an equivalent Offset Mortgage.

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Link Versus Borrow to Invest

… suppose a mortgage borrower was prepared to create a new asset and liability in an attempt to replicate a Link – specifically, by making a further drawing under the mortgage to fund the purchase of financial assets equivalent to the Reference Assets. We call this scenario “borrow to invest”.

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The Regulatory Regime Considered

… an Index Mortgage is not a “financial product” and so a dealing in an Index Mortgage is not a “financial service” requiring licensing under Part 7.6 of the Act.

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Documenting The Index Mortgage

Documenting the Index Mortgage de novo or converting an existing mortgage into an Index Mortgage is a simple matter, requiring just a few additional terms and definitions to a standard suite of loan conditions.

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