In this paper we identify the relationship of the pricing of residential mortgage lending products to their market share during the run up to the financial crisis of 2007. We then use this relationship to decompose the total impact of nontraditional mortgage products on house price declines...

In this paper we offer direct evidence that financial intermediation does impact underlying asset markets. We develop a specific observable symptom of a banking system that underprices the put option imbedded in non-recourse asset-backed lending. Using a dataset for 19 countries and over 500...

Lenders are frequently accused of mispricing the put option imbedded in non-recourse lending (Herring and Wachter, 1999 and 2003). Prior research (Pavlov and Wachter, 2004) shows one lender's incentives to underprice. Here we identify the conditions for a market-wide underpricing equilibrium. We...