Growing experimental evidence suggests that loss aversion plays an important role in asset allocation decisions. We study the asset allocation of a linear loss-averse (LA) investor and compare the optimal LA portfolio to the more traditional optimal mean-variance (MV) and conditional...

Growing experimental evidence suggests that loss aversion plays an important role in asset allocation decisions. We study the asset allocation of a linear loss-averse (LA) investor and compare the optimal LA portfolio to the more traditional optimal mean-variance (MV) and conditional...

We study the asset allocation of a quadratic loss-averse (QLA) investor and derive conditions under which the QLA problem is equivalent to the mean-variance (MV) and conditional value-at-risk (CVaR) problems. Then we solve analytically the two-asset problem of the QLA investor for a risk-free...

Especially structured finance instruments were blamed as main reason for the financial crisis 2007, but the understanding for the motivation to originate securitization products is less discovered. Therefor this paper tries to identify main balance sheet characteristics of structured finance...

In this paper, we provide an overview of the subprime mortgage securitization process and the seven key informational frictions that arise. We discuss the ways that market participants work to minimize these frictions and speculate on how this process broke down. We continue with a complete...

This paper presents a study of the role of the rating agencies during the 2008 financial crisis in the US. The rating agencies are embedded in an assurance market as knowers; that is, as active searchers or creators of information on the quality of mortgage backed securities (MBS). This market...

In this paper, we empirically investigate two economic issues (1) the factors that affect the primary market spread on non-U.S. asset-backed securities and (2) whether investors rely solely on credit ratings and ignore other credit-related factors. We do so by using a panel-data fixed-effects...

This paper uses the market-standard Gaussian copula model to show that fair spreads on CDO tranches are much higher than fair spreads on similarly-rated corporate bonds. It implies that credit ratings are not sufficient for pricing, which is surprising given their central role in structured...

We investigate the competitive landscape of underwriting services in the Eurobond market including the choice of underwriter and underwriter gross spread. We find a significant but declining association between the home market of the Eurobond’s currency of denomination and that of the lead...

Seasoned equity offerings (SEOs) executed through accelerated underwritings have increased global market share recently, raising over $850 billion since 1998, and now account for over half (two-thirds) of the value of U.S. (European) SEOs. We examine 31,242 global SEOs, executed during...