We investigate full prepayments of Japanese residential mortgages during a ten-year period from 1996 to 2005. This investigation is important because the amount of mortgages outstanding in Japan is huge, yet the study on their prepayments is very limited. This period from 1996 to 2005 was...

Cochrane and Sa'a-Requejo (2000, Journal of Political Economy) proposed the good-deal price bounds for the European call option on an event that is not a traded asset, but is correlated with a traded asset that can be used as an approximate hedge. One remarkable feature of their model is that...

We will generalize the Black-Scholes option pricing formula by incorporating stochastic interest rates. Although the existing literature has obtained some formulae for stock options under stochastic interest rates, the closed-form solutions have been known only under the Gaussian (Merton type)...