@ARTICLE\{IMM2007-05057,
    author       = "K. M. Rasmussen and S. A. Zenios",
    title        = "Well ARMed and FiRM:Diversification of mortgage loans for homeowners",
    year         = "2007",
    keywords     = "Mortgage backed securities, Conditional value at risk, Stochastic programming",
    pages        = "67-84",
    journal      = "The Journal of Risk",
    volume       = "10",
    editor       = "",
    number       = "",
    publisher    = "",
    note         = "Submitted",
    url          = "http://www2.compute.dtu.dk/pubdb/pubs/5057-full.html",
    abstract     = "Individual homeowners are offered today a wide range of mortgage
options for financing the purchase of a house. Usually, homeowners
are also granted an option to repay the mortgage loan, and in some
countries - such as Denmark - it is particularly efficient to do so as
market conditions change or the homeowner's situation warrants it.
And while, traditionally, a single mortgage loan would serve borrower
needs, today it appears that a portfolio of loans may satisfy much
better the mortgage needs of the individual and his or her appetite
for risk. In this paper we develop a model for the diversification of
mortgage loans of a homeowner and apply it to data from the Danish
market. Even in the presence of mortgage origination costs it is shown
that most risk averse homeowners will do well to consider a diversified
portfolio of both fixed (FRM) and adjustable (ARM) rate mortgages.
This is particularly so if one takes, unavoidably, a long term perspective
in financing the purchase of a home through a mortgage loan."
}