This paper develops a nonparametric, model-free approach to the pricing and hedging of mortgage-backed securities (MBS), using multivariate density estimation procedures to investigate the relation between MBS prices and interest rates. While the usual methods of valuing MBSs are highly...

This paper develops a new strategy for dynamically hedging mortgage-backed securities (MBSs). The approach involves estimating the joint distribution of returns on MBSs and T-note futures, conditional on current economic conditions. We show that our approach has a simple intuitive interpretation...

This paper develops a nonparametric, model-free approach to the pricing of mortgage-backed securities (MBS), using multivariate density estimation (MDE) procedures to investigate the relation between MBS prices and interest rates. While the usual methods for valuing MBSs are highly dependent on...

This paper presents a general, nonlinear version of existing multifactor models, such as Longstaff and Schwartz (1992). The novel aspect of our approach is that rather than choosing the model parameterization out of quot;thin airquot;, our processes are generated from the data using...

Combining insights from the contingent claims and the asset-backed securities literatures, we study the economics of value creation in the asset management business. In particular, we provide a theoretical model and a closed form formula for the value of fund fees in the presence of the well...

The cost of executive stock options to shareholders has become a focus of attention in finance and accounting. The difficulty is that the value of these options depends on the exercise policies of the executives. Because these options are nontransferable, the usual theory does not apply. We...

Investors have become increasingly concerned about the cost of executive stock options to shareholders. Because executives face hedging constraints, standard option theory does not apply. The valuation problem reduces to accurately characterizing the option payoff. This paper develops a...

The cost of executive stock options to shareholders has become a focus of attention in finance and accounting. The difficulty is that the value of these options depends on the exercise policies of the executives. Because these options are nontransferable, the usual theory does not apply. We...

Options have become a major component of corporate compensation. Their cost to arms depends on the exercise policies of executives who face hedging constraints. This paper analyzes the optimal policy and option cost for an executive with general concave utility. We show analytically how the...

This paper is the first to perform a comprehensive estimation of employee stock option ex- ercise behavior and option cost to firms. We develop a GMM-based methodology, robust to heteroskedasticity and correlation across exercises, for estimating the rate of voluntary option exercise as a...