U.K. equity release actuaries are using a flawed approach to value the no-negative equity guarantees in their equity release mortgages. The approach they use, the discounted projection approach, incorrectly uses projected future house prices as the underlying prices in their put option pricing equations. The correct approach uses forward house prices. The discounted projection approach entails significant undervaluations of no-negative equity guarantees and overvaluations of equity release mortgages and can produce valuations that violate rational pricing principles. The discounted projection approach is also inconsistent with both actuarial and accounting standards. Our results have significant ramifications for equity release industry practice and prudential regulation.

英国股权释放精算师正在使用一种有缺陷的方法来评估其股权释放抵押中的无负股权担保。他们使用的方法，即贴现预测方法，错误地使用预测的未来房价作为看跌期权定价方程式中的基础价格。正确的方法是使用远期房价。贴现预测法导致对无负股权担保的严重低估和对股权释放抵押的高估，并可能产生违反理性定价原则的估值。贴现预测法也不符合精算和会计准则。我们的结果对股权发行行业实践和审慎监管有重大影响。