irrational call option

Definition

An option contained within a mortgage that allows borrowers to refinance when the prevailing mortgage rates fall to a certain level below the stated interest rate on the mortgage. So named because the behavior of borrowers in the application of the option seems to be unpredictable with many failing to exercise the option when it is to their benefit to do so.
Browse Definitions by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
IRR irrational exuberance