Related papers: Mortgage Contracts and Underwater Default
This article proposes a spatial dynamic structural equation model for the analysis of housing prices at the State level in the USA. The study contributes to the existing literature by extending the use of dynamic factor models to the…
While the success of large language models (LLMs) increases demand for machine-generated text, current pay-per-token pricing schemes create a misalignment of incentives known in economics as moral hazard: Text-generating agents have strong…
The prevention of rapidly and steeply falling market prices is vital to avoid financial crisis. To this end, some stock exchanges implement a price limit or a circuit breaker, and there has been intensive investigation into which regulation…
We study the aggregate hazard rate of a heterogeneous population whose individual event intensities are modeled as Cox (doubly stochastic) processes. In the deterministic hazard setting, the observed pool hazard is the survival weighted…
Does the ability to protect an asset from unsecured creditors affect its price? This paper identifies the impact of bankruptcy protection on house prices using 139 changes in homestead exemptions. Large increases in the homestead exemption…
We propose a sequential monitoring scheme to find structural breaks in real estate markets. The changes in the real estate prices are modeled by a combination of linear and autoregressive terms. The monitoring scheme is based on a detector…
We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…
A problem of optimal debt management is modeled as a noncooperative game between a borrower and a pool of lenders, in infinite time horizon with exponential discount. The yearly income of the borrower is governed by a stochastic process.…
The lifetime behaviour of loans is notoriously difficult to model, which can compromise a bank's financial reserves against future losses, if modelled poorly. Therefore, we present a data-driven comparative study amongst three techniques in…
This study investigates the functioning of modern payment systems through the lens of banks' maturity mismatch practices, and it examines the effects of banks' refusal to roll over short-term interbank liabilities on financial stability.…
This work investigates the topical problem of balancing the shallow water equations over the bottom steps of different heights. The current approaches in the literature are essentially based on mathematical analysis of the hyperbolic system…
A three-dimensional extension of the structural default model with firms' values driven by correlated diffusion processes is presented. Green's function based semi-analytical methods for solving the forward calibration problem and backward…
We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…
We extend the information-based asset-pricing framework by Brody, Hughston \& Macrina to incorporate a stochastic bankruptcy time for the writer of the asset. Our model introduces a non-defaultable cash flow $Z_T$ to be made at time $T$,…
Unfairness in mortgage lending has created generational inequality among racial and ethnic groups in the US. Many studies address this problem, but most existing work focuses on correlation-based techniques. In our work, we use the…
A direct method for calculating default rates by industry and target corporate segments is not possible given the lack of statistical data. The proposed paper considers a model for filtering the dynamics of the probability of default of…
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors.…
We introduce a new model of combinatorial contracts in which a principal delegates the execution of a costly task to an agent. To complete the task, the agent can take any subset of a given set of unobservable actions, each of which has an…
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
With increasing energy prices, low income households are known to forego or minimize the use of electricity to save on energy costs. If a household is on a prepaid electricity program, it can be automatically and immediately disconnected…