In this study, we propose a method based on large deviation theory (LDT), which minimises credit risk (expected loss). We demonstrate how mortgage loan portfolios can be optimised using geographical differences in the risk characteristics of mortgage loans in the UK. Our empirical results show...

No, it doesn't, despite the general perception that illiquidity matters in real estates. As expected, the illiquidity costs we estimate for the US residential properties are large. They are on average equivalent to 12% of the total property returns, ranging from 9.5% to 29.5% of property prices...