Path dependent securities depend on current and past values of underlying state variables. Consequently, the usual backward evaluation technique is difficult to apply since state variable values existing earlier in real time are unknown. This paper develops a series of propositions which makes...

This paper constructs a reduced-form credit risk model of mortgage default. The data used is of privately-securitized subprime ARMs (adjustable rate mortgages), originated between 1997 and 2008, and observed between 2000 and 2009. The period studied thus encompasses the beginning of the subprime...

This paper constructs a reduced-form credit risk model of mortgage default. The data used is of privately-securitized subprime ARMs (adjustable rate mortgages), originated between 1997 and 2008, and observed between 2000 and 2009. The period studied thus encompasses the beginning of the subprime...

We investigate how market participants possessing varying degrees of anonymity reduce asymmetric information costs in an electronic auction market using a quantifiable measure of reputation. The data suggest that purchasers in this self-enforcing market use reputation to price information...

We provide empirical evidence that quoted secondary market mortgage yields conform to the predictions of option theory. We compare Fannie Mae and Freddie Mac origination yields offered in the secondary market from 1985 to 2003 with the predictions of a two-state binomial mortgage option...

We investigate jump memory using an extensive database of short-term S&P 500 index options. Jump memory refers to the attenuation of the implied jump intensity and magnitude parameters following a crash event. We use a genetic algorithm to obtain a time series of implied parameter estimates and...

Exchange traded futures contracts often are not written on the specific asset that is a source of risk to a firm. The firm may attempt to manage this risk using futures contracts written on a related asset. This cross hedge exposes the firm to a new risk, the spread between the asset underlying...