3rd International Conference on Economics, Finance and Management Outlooks 27-28 July, 2015 Lebua Hotels and Resorts, 1055 Silom Road, Bangrak, Bangkok 10500 Thailand

1. Abstract of Economics, Finance and Management Outlooks, 2015, Vol.3
DOI: 10.18488/journal.1003/2015.3/1003.3
3rd International Conference on Economics, Finance
and Management Outlooks
27-28 July, 2015
Lebua Hotels and Resorts, 1055 Silom Road, Bangrak, Bangkok
10500 Thailand
Conference Website: www.pakrdw.com
13
Paper ID: 635/15/3
rd
ICEFMO
One-sided Linking of Mortgage Loans to the Price of Foreign
Currencies
Nahum Biger1
1
Carmel Academic Center, Haifa, Israel
Abstract
Complex securities based on combinations of bonds and derivatives became very
common. The translation to such inventions to loans to private household borrowers
changes the game of derivatives to become potentially unfair. The paper demonstrates
this contention by reference to one particular fairly popular arrangement of home
mortgage loans where the payments are one-sided linked to a currency exchange rate.
A real world example is described, a pricing model applied and the complexity of the
valuation process that is beyond an even rational borrower renders the arrangement to
be potentially unfair to naïve borrowers.
Keywords: Currency linked loans, One-sided linkage, Put options, Valuation model, Compensation.