In mortgage default modeling, many of the key variables, such as loan age, FICO score, Debt-to-Income Ratio (DTI), and Loan-to-House-Value Ratio (LTV), have nonlinear relationship with the target default/delinquency rates. To catch the nonlinearity in the response function, experienced modelers...

This paper addresses a situation wherein a retail investor must liquidate positions in her portfolio -- consisting of assets and European options on those assets -- to meet a margin call and wishes to do so with the least disruption to her portfolio. We address the problem by first generalizing...