This paper characterizes the complete class of time-invariant portfolio insurance strategies and derives the corresponding value functions that relate the wealth accumulated under the strategy to the value of the underlying insured portfolio. Time-invariant strategies are shown to correspond to...

In this paper, the authors develop a model for valuing debt options which takes into account the changing characteristics of the underlying bond by assuming that the standard deviation of return is proportional to the bond's duration. The resulting model uses the bond price as the single state...

This paper puts forward a valuation framework for mortgage-backed securities. Rather than imposing an optimal, value minimizing call condition, the authors assume that at each point in time there exists a probability of prepaying, this conditional probability depending upon the prevailing state...