Measuring the economic value of loan advice

Taylor, Nick James 2012. Measuring the economic value of loan advice. Economics Letters 117 (3) , pp. 615-618. 10.1016/j.econlet.2012.08.006

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Abstract

The purpose of this paper is to provide a method by which the economic value of loan advice can be measured. This is achieved by defining advice in terms of the forecasts of future repayments in order to produce a disutility-minimising loan strategy. The economic value of this strategy is then calculated by considering the fee one is willing to pay to avoid switching to a competing strategy during each period. Applying the methodology to UK fixed and variable mortgage rates produces performance fees that are high when advice takes account of the dynamics of repayments. Moreover, the conditions under which these fees are significantly different from zero are identified.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Schools > Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Uncontrolled Keywords:	Loan advice; Disutility; Performance fees
Publisher:	Elsevier
ISSN:	0165-1765
Last Modified:	25 Jun 2017 03:53
URI:	https://orca.cardiff.ac.uk/id/eprint/39640

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