Limits of Arbitrage: Theory and Evidence from the Mortgage-Backed Securities Market
نویسندگان
چکیده
منابع مشابه
Rational Prepayment and the Valuation of Mortgage-Backed Securities
This article presents a new model of mortgage prepayments, based on rational decisions by mortgage holders. These mortgage holders face heterogeneous transaction costs, which are explicitly modeled. The model is estimated using a version of Hansen’s (1982) generalized method of moments, and shown to capture many of the empirical features of mortgage prepayment. Estimation results indicate that ...
متن کاملMeasuring the Effects of Prepayments on Mortgage-Backed Securities
Mortgage-backed securities differ from corporate and government bonds in that their cash flows cannot be estimated with certainty, since homeowners often prepay their mortgages. Prepayments may include sale of the property, refinancing, curtailments, or liquidation of the property due to foreclosure. Standard fixed-income measurements, which allow investors to compare different types of bonds, ...
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Financial reform legislation passed by Congress in 2010 requires mortgage originators to retain some loss exposure on the mortgages they securitize. Recent research compares the performance of mortgage-backed securities for different types of issues in which originators retain different degrees of loss exposure. The findings suggest that retention of even modest loss exposure by originators red...
متن کاملCommercial Mortgage Backed Securities (CMBS) and Market Efficiency with respect to Costly Information
Commercial mortgage backed securities (CMBS) are complex asset backed securities trading in markets that do not currently use derivatives pricing technology. This lack of usage is due to the complexity of the modeling exercise, and only the recent and costly availability of historical data. As such, CMBS markets provide a natural environment for the testing of market efficiency with respect to ...
متن کاملOptimal prepayment and default rules for mortgage-backed securities
We study the optimal stopping problems embedded in a typical mortgage. Despite a possible non-rational behaviour of the typical borrower of a mortgage, the problem is worth to be solved for the lender to hedge against the prepayment risk, and because many mortgage-backed securities pricing model incorporate this suboptimality via a so-called prepayment function which can depend, at time t, on t...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2004
ISSN: 1556-5068
DOI: 10.2139/ssrn.556116