We study the optimal stopping problems embedded in a typical mortgage. Despite a possible non-rational behaviour of the typical borrower of a mortgage, the problem is worth to be solved for the lender to hedge against the prepayment risk, and because many mortgage-backed securities pricing model incorporate this suboptimality via a so-called prepayment function which can depend, at time t, on t...

Asset-backed securitization will greatly promote the sustainability of infrastructure construction and financing. However, there are quite limited researches conducted in this field. Given project characteristics securities, paper proposes issuance steps redeemable asset-backed notes (ABN) based on project’s usufruct as basic asset. Taking expressway franchise an example, issuing scale coupon r...

We develop a theory of financial innovation in which both market structure and the payoffs claims being traded are determined endogenously. Intermediaries use cash flows an underlying asset to design securities for investors. Demand arises as investors choose markets then trade using strategies represented by quantity-price schedules. show that intermediaries create increasingly riskier asset-b...

This paper analyses effects of an interest rate freeze in subprime mortgages on residential mortgage backed securities (RMBS). In particular, we study shifts in the underlying portfolio’s discounted cashflow distributions as well as changes in the payment profile of RMBS-tranches. We show that the positive effects of a rate freeze, e.g. less foreclosures and a stabilizing housing market, can ou...