We use cookies to ensure that we give you the best experience on our website. You can change your cookie settings at any time. Otherwise, we'll assume you're OK to continue.

Durham University

Research & business

View Profile

Publication details for Professor Muhammed-Shahid Ebrahim

Ebrahim, Muhammed-Shahid (1996). On the Design and Pareto-Optimality of Participating Mortgages. Real Estate Economics 24(3): 407-419.

Author(s) from Durham


This paper develops a micro-economic model and proceeds with numerical simulation to demonstrate that participating mortgages can improve social welfare when the real estate ownership is shared among the different taxable entities. The optimal distribution of real estate ownership and lending will tend to be concentrated in taxable and nontaxable hands, respectively, with lending conducted via participating mortgages. This paper also demonstrates the violation of the well-known, risk-neutral valuation argument of the Black and Scholes (1973) model because of the lack of a riskless hedge due to the uniqueness of real estate.