[00998] An Optimal Consumption-Portfolio Strategy and Housing Choice Problem with a Loan-to-Value Ratio
Session Time & Room : 3C (Aug.23, 13:20-15:00) @A510
Type : Contributed Talk
Abstract : This paper promotes a housing choice problem with a loan-to-value ratio by an extended dynamic programming approach. Before purchasing a house, an individual agent rents a house to live in. After purchasing a house, the agent owns a house and uses it as collateral for borrowing. One main contribution is that the loan-to-value ratio has positive effects on an individual agent's decisions both before and after the time of purchasing a house. We find that an individual agent with a higher loan-to-value ratio delays the time to buy a house and purchases a larger house. We provide closed-form solutions for each optimal policy. We also demonstrate the solutions numerically and discuss the economic implications.
