This paper shows that high frequency trading may play a dysfunctional role in financial markets. Contrary to arbitrageurs who make financial markets more efficient by taking advantage of and thereby eliminating mispricings, high frequency traders can create a mispricing that they unknowingly...

This paper provides a model for housing prices based on a seller solving the optimal time-on-the market problem. Given the seller’s optimal time-on-the market, analytical expressions are provided for both the expected time-on-the-market and the sales price. These expressions facilitate the...

type="main" <p>We develop a micro-based macromodel for residential home prices in an economy where defaults on residential mortgages negatively affect housing prices. Our model enables us to study the impact of subprime defaults on prime borrowers and the impact of various government policies on...</p>

This paper estimates the price for restructuring risk in the US corporate bond market during 1999-2005. Comparing quotes from default swap (CDS) contracts with a restructuring event and without, we find that the average premium for restructuring risk represents 6%-8% of the swap rate without...