Limits of Arbitrage: Theory and Evidence From The Mortgage - Backed Securities Market  

Oleh:

Gabaix, Xavier ; Krishnamurthy, Arvind ; Vigneron, Olivier

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 62 no. 2 (Apr. 2007), page 557-596.
Topik: MORTGAGE; studies; mortgage backed securities; prepayments; risk; arbitrage; securities markets
Fulltext: p 557.pdf (258.5KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

"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.

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