This research examines the implications of contingent-claims models for empirical research on default. We focus on the probability of default over a short horizon given the current state of the world, "i.e.", the conditional probability of default, which more closely resembles the estimates of...

Using recent theoretical advances and an extensive panel data set on metropolitan areas, this study provides new tests of the contingent claims based model of default. The empirical modeling incorporates a full complement of variables that permit direct tests of the options-based model including...

The appraisal of the "market value" of homes serving as the collateral for mortgages is a fundamental part of the underwriting process. If a loan should default, however, it is not the retail market value that the lender obtains, but rather the "recovery value." In this research, we show how...