The real cost of the Government Mortgage Indemnity Scheme : an application of the option pricing theory

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dc.contributor.advisorHigh, Hughen_ZA
dc.contributor.authorSeslija, Ljubisaen_ZA
dc.date.accessioned2016-03-04T16:43:58Z
dc.date.available2016-03-04T16:43:58Z
dc.date.issued1995en_ZA
dc.descriptionBibliography: pages 65-66.en_ZA
dc.description.abstractThe legacy of apartheid in the social and economic fabric of South Africa is pervasive. More than two million households, with an average of five persons per household, are living in shacks or in hostels. Thus, the South African Government of National Unity as its most urgent priority has endeavoured to find solutions to this disastrous housing crisis. Thus, the Government proposed - amongst other measures - to establish a Government-supported Mortgage Indemnity Scheme. However, such loan-guarantees are not cost free. Moreover, since they are contingent liabilities, the contingency of which may be realised and thus impose a cost to the Government, it is important that such cost be known or estimated. Using the modified Merton's model of an analytic derivation of the cost of loan guarantees, this paper evaluates the potential cost that may be imposed to the Government. While the paper recognised that there may be scope for some kind of the Government loan guarantees, the overriding theme is that the Government should charge a fee for its loan guarantee. Moreover, it has also been illustrated that the main beneficiaries of the MIS will be: (a) households at the upper end of the low-cost housing market, and (b) private financial institutions which will be indemnified by the terms of MIS. Accordingly, the mere fact that the main beneficiaries will be those two categories of end-users and not these at the lower segment of the low-cost housing market suggests that the MIS may not attain its principal purpose - that of serving these in the lowest income group. Thus, there is no reason why the Government should bear the likely cost of the MIS. In contrast, the Government should charge a fee for its guarantee.en_ZA
dc.identifier.apacitationSeslija, L. (1995). <i>The real cost of the Government Mortgage Indemnity Scheme : an application of the option pricing theory</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,School of Economics. Retrieved from http://hdl.handle.net/11427/17474en_ZA
dc.identifier.chicagocitationSeslija, Ljubisa. <i>"The real cost of the Government Mortgage Indemnity Scheme : an application of the option pricing theory."</i> Thesis., University of Cape Town ,Faculty of Commerce ,School of Economics, 1995. http://hdl.handle.net/11427/17474en_ZA
dc.identifier.citationSeslija, L. 1995. The real cost of the Government Mortgage Indemnity Scheme : an application of the option pricing theory. University of Cape Town.en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Seslija, Ljubisa AB - The legacy of apartheid in the social and economic fabric of South Africa is pervasive. More than two million households, with an average of five persons per household, are living in shacks or in hostels. Thus, the South African Government of National Unity as its most urgent priority has endeavoured to find solutions to this disastrous housing crisis. Thus, the Government proposed - amongst other measures - to establish a Government-supported Mortgage Indemnity Scheme. However, such loan-guarantees are not cost free. Moreover, since they are contingent liabilities, the contingency of which may be realised and thus impose a cost to the Government, it is important that such cost be known or estimated. Using the modified Merton's model of an analytic derivation of the cost of loan guarantees, this paper evaluates the potential cost that may be imposed to the Government. While the paper recognised that there may be scope for some kind of the Government loan guarantees, the overriding theme is that the Government should charge a fee for its loan guarantee. Moreover, it has also been illustrated that the main beneficiaries of the MIS will be: (a) households at the upper end of the low-cost housing market, and (b) private financial institutions which will be indemnified by the terms of MIS. Accordingly, the mere fact that the main beneficiaries will be those two categories of end-users and not these at the lower segment of the low-cost housing market suggests that the MIS may not attain its principal purpose - that of serving these in the lowest income group. Thus, there is no reason why the Government should bear the likely cost of the MIS. In contrast, the Government should charge a fee for its guarantee. DA - 1995 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 1995 T1 - The real cost of the Government Mortgage Indemnity Scheme : an application of the option pricing theory TI - The real cost of the Government Mortgage Indemnity Scheme : an application of the option pricing theory UR - http://hdl.handle.net/11427/17474 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/17474
dc.identifier.vancouvercitationSeslija L. The real cost of the Government Mortgage Indemnity Scheme : an application of the option pricing theory. [Thesis]. University of Cape Town ,Faculty of Commerce ,School of Economics, 1995 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/17474en_ZA
dc.language.isoengen_ZA
dc.publisher.departmentSchool of Economicsen_ZA
dc.publisher.facultyFaculty of Commerceen_ZA
dc.publisher.institutionUniversity of Cape Town
dc.subject.otherEconomicsen_ZA
dc.titleThe real cost of the Government Mortgage Indemnity Scheme : an application of the option pricing theoryen_ZA
dc.typeMaster Thesis
dc.type.qualificationlevelMasters
dc.type.qualificationnameMComen_ZA
uct.type.filetypeText
uct.type.filetypeImage
uct.type.publicationResearchen_ZA
uct.type.resourceThesisen_ZA
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