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Professor Dan Quan (Real Estate Finance, Cornell University) Default and Delinquency of Securitized Hotel Mortgages
We specify and estimate a structural model of securitized hotel mortgage delinqency and default. Using a unique loan-level panel database, we are able to distinguish between various stages of loan distress prior to the default state. We view arriving at these states as the outcome of a dynamic programming problem solved by the borrower. Our structural model thus captures the decision making process of the borrower at the loan level. This structural approach can potentially yield a better predictive model of the default and delinquency decision even in economic environments the CMBS market has yet to experience such as during a downturn in commerical real estate prices. We are also able to incorporate contemporaneous property level performance measures from our access to competitive set information for each hotel from Smith Travel Research. Another innovation of our paper is the use of a cumulative wealth variable which captures the performance of the property in prior periods to explain the subsequent delinquency or default decisions. We find that despite the increased complexity of our model, reasonable results are obtain.
- Speaker
- Professor Dan Quan, Real Estate Finance, Cornell University
- Venue
- Room F61, Edward Wright Building
- Contact