Value of parameters in the calculation of interest rate
| Parameter | Definition | Value |
|---|---|---|
| H0 | Initial value of property | 100 |
| r0 | Initial value of short term rate | 7.5% |
| δH | Service flow rate | 3% |
| σH | Volatility of property value | 10% |
| σr | Volatility of short term rate | 1% |
| Α | Speed of mean reversion | 5% |
| Μ | Long run mean of short-term rates | 7.5% |
| ρH,r | Correlation between property value and short term rate | −0.5 |
| T | Life time of the loan | 30 |
| L | Cost of redevelopment ratio | 80% |
| θ | Participation rate for tax increment | 50% |
| n | Number of properties in the district | 100 |
| π | Tax rate | 10% |
| Parameter | Definition | Value |
|---|---|---|
| Initial value of property | 100 | |
| Initial value of short term rate | 7.5% | |
| Service flow rate | 3% | |
| Volatility of property value | 10% | |
| Volatility of short term rate | 1% | |
| Speed of mean reversion | 5% | |
| Long run mean of short-term rates | 7.5% | |
| Correlation between property value and short term rate | −0.5 | |
| Life time of the loan | 30 | |
| Cost of redevelopment ratio | 80% | |
| Participation rate for tax increment | 50% | |
| Number of properties in the district | 100 | |
| Tax rate | 10% |
Note:
These are the values for the parameters to calculate the interest rate in P-TIF