by Jeffery W. Gunther and Anna Zhang The banking industry’s treatment of loans has undergone a dramatic transformation over the past two decades. While maintaining their traditional role in originating loans and holding them on their books, banks have become more likely to create and sell securities backed by pools of loans and other debt instruments. Banks’ adoption of the “originate-to-distri...

A dividend imputation tax system provides shareholders with a credit (for corporate tax paid) that can be used to offset personal tax on dividend income. This paper shows how to infer the value of imputation tax credits from the prices of derivative securities that are unique to Australian retail markets. We also test whether a tax law amendment that was designed to prevent the trading of imput...

We consider a pricing model for mortgage backed securities formulated as a non-linear partial differential equation. We show that under certain feasible assumptions this model can be greatly simplified. We prove the well posedness of the simplified PDE.

We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of dynamic subscale invariant performance measures, on a general probability space, and discrete time setup. We prove a representation theorem of such measures...

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...