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Limits of arbitrage: theory and evidence from the mortgage-backed securities market

"Limits of Arbitrage" theories hypothesize that the marginal investor in a particular asset market is a specialized arbitrageur rather than a diversified representative investor. We examine the mortgage-backed securities (MBS) market in this light. We show that the risk of homeowner prepayment, which is a wash in the aggregate, is priced in the MBS market. The covariance of prepayment risk with aggregate wealth implies the wrong sign to match the observed prices of prepayment risk. The price of risk is better explained by a kernel based on MBS market-wide specific risk, consistent with the specialized arbitrageur hypothesis..Printed Journal

Ketersediaan

Call NumberLocationAvailable
PSB lt.dasar - Pascasarjana1
Penerbit The American Finance Association.,
Edisi -
Subjek Risk
Securities Markets
Arbitrage
studies
Mortgage backed securities
Prepayments
ISBN/ISSN 221082
Klasifikasi -
Deskripsi Fisik -
Info Detail Spesifik -
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