We thank Michael Blank, Lauren Gaudino, Emir Kamenica, Nikolai Roussanov, Jann Spiess, Dan Tortorice, Tim Murphy, Kenneth Weinstein, and Eric Zwick for excellent research assistance. We are particularly grateful to Fan Zhang who introduced us to Lambert's W-function, which is needed to express our implicit solution for the refinancing differential as a closed form equation. We also thank Brent Ambrose, Ronel Elul, Xavier Gabaix, Bert Higgins, Erik Hurst, Michael LaCour-Little, Jim Papadonis, Sheridan Titman, David Weil, participants at seminars at the NBER Summer Institute and Johns Hopkins, the editor, and two anonymous referees for helpful comments. Laibson acknowledges support from the NIA (P01 AG005842) and the NSF (0527516). Earlier versions of this paper with additional results circulated under the titles “When Should Borrowers Refinance Their Mortgages?”, and “Mortgage Refinancing for Distracted Consumers.” The views expressed in this paper do not necessarily reflect the views of the Federal Reserve Board.
Optimal Mortgage Refinancing: A Closed-Form Solution
Article first published online: 17 MAY 2013
© 2013 The Ohio State University
Journal of Money, Credit and Banking
Volume 45, Issue 4, pages 591–622, June 2013
How to Cite
AGARWAL, S., DRISCOLL, J. C. and LAIBSON, D. I. (2013), Optimal Mortgage Refinancing: A Closed-Form Solution. Journal of Money, Credit and Banking, 45: 591–622. doi: 10.1111/jmcb.12017
- Issue published online: 17 MAY 2013
- Article first published online: 17 MAY 2013
- Manuscript Accepted: 22 JUN 2012
- Manuscript Received: 11 JUN 2010
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