following the evolution occurred in capital markets and dematerialization of securities, indirect holding system (ihs) of securities was performed so that the risk of paper crunch, robbery or loss of physical securities decreases. in this research in addition to investigating the disadvantages of direct holding system, we concluded that the main characteristic of this system is the direct relat...

We consider the problem of maximizing the expected utility from consumption or terminal wealth in a market where logarithmic securities prices follow a Lévy process. More specifically, we give explicit solutions for power, logarithmic and exponential utility in terms of the Lévy-Chinchine triplet. In the first two cases, a constant fraction of current wealth should be invested in each of the se...

Financial reform legislation passed by Congress in 2010 requires mortgage originators to retain some loss exposure on the mortgages they securitize. Recent research compares the performance of mortgage-backed securities for different types of issues in which originators retain different degrees of loss exposure. The findings suggest that retention of even modest loss exposure by originators red...

We present a model of asset valuation in which short-selling is achieved by searching for security lenders and by bargaining over the terms of the lending fee. If lendable securities are difficult to locate, then the price of the security is initially elevated, and expected to decline over time. This price decline is to be anticipated, for example, after an initial public offering (IPO), among ...

By December 2008, structured finance securities accounted for over $11 trillion worth of outstanding U.S. bond market debt (35%). The lion’s share of these securities was highly rated by rating agencies. More than half of the structured finance securities rated by Moody’s carried a AAA rating—the highest possible credit rating. In 2007 and 2008, the creditworthiness of structured finance securi...

Assessing the probabilities of future events is a problem often faced by science policymakers. For example, CERN, the European laboratory for particle physics, recently had to judge whether the probability of discovering a Higgs boson was high enough to justify extending the operation of its collider (see Science, 22 Sept., p. 2014 and 29 Sept., p. 2260). At the Foresight Exchange (FX) Web site...

We document empirically the determinants of the observed recovery rates on defaulted securities in the United States over the period 1982–1999. The recovery rates are measured using the prices of defaulted securities at the time of default and at the time of emergence from default or from bankruptcy. In addition to seniority and security of the defaulted securities, industry conditions at the t...

I investigate the impact of noise trading on securities market efficiency using data from short-horizon Arrow-Debreu securities traded on an online exchange. Using liquidity as a proxy for the amount of noise trading, I show that securities markets with persistently high noise trade exhibit significant pricing anomalies, such as overpricing low probability events and underpricing high probabili...

The recent turmoil in financial markets brought new challenges and demands to the compilers of statistics. The current set of statistics on financial markets seemed insufficient for an appropriate and prompt intervention of policy-makers. With the present knowledge about the holdings of mortgage-backed securities or asset-backed securities, it proved very difficult to find who ultimately bears ...

Since 2007, three actors have been particularly important in U.S. Treasury auctions: The U.S. government, issuing $8.4 trillion in U.S. Treasury securities in 2010 alone; foreign official entities, purchasing $398 billion in U.S. Treasury securities in 2010 alone; and finally the Federal Reserve, which intervened in the U.S. Treasury market by purchasing $900 billion U.S. Treasury securities du...