We identify two data-related errors in the work of Ouazad and Kahn (OK, RFS 2021). Correcting either of these errors or both entirely reverses the original result, in OK’s code and in our independent implementation. The two corrections we implement are to use the correct FHFA conventional loan...

We derive the optimal credit default swap premium a financial institution requires to assume the default risk of fixed income instruments. This premium is a function of the institution's capital and current exposure. In most cases, an institution requires an increasing premium to assume...

Lenders are frequently accused of mispricing the put option imbedded in non-recourse lending (Herring and Wachter, 1999 and 2003). Prior research (Pavlov and Wachter, 2004) shows one lender's incentives to underprice. Here we identify the conditions for a market-wide underpricing equilibrium. We...