Investigating the residential mortgage defaults and prepayments has been the subject of research for the past three decades. The literature on mortgage default and prepayment is often used to inform credit risk policies and asset pricing strategies. This literature has evolved from the use of...

Using data on privately-securitized subprime ARMs (adjustable rate mortgages) originated between 1997 and 2008 and observed between 2000 and 2008, and so covering the start of the subprime crisis, this paper constructs a reduced-form credit risk model of default, and then uses contractual...