This paper implements the time-state preference model in a multi-period economy, deriving the prices of primitive securities from the prices of call options on aggregate consumption. These prices permit an equilibrium valuation of assets with uncertain payoffs at many future dates. Furthermore,...

This article computes empirical option costs for fixed rate mortgages and compares them to brokers' forecasts. Estimates of risks for mortgage derivatives such as IOs are also examined and shown to have very substantial errors and very substantial differences in the forecasts by different brokers