We develop a theoretical model demonstrating the potential spillover effects associated with the introduction of risky assets. Specifcally, we examine the potential increase in mortgage default risk on prime mortgages that results from the introduction of subprime mortgages in a local area. The...

The capital structure irrelevance argument of Modigliani and Miller (1958) implies that the use of debt or leases should have no impact on firm values. This classical argument leaves out several important considerations crucial for the result, in particular, counterparty credit risk. We...

This paper focuses on the defaultable lease rate term structure with endogenous default. We combine the competitive lease market argument proposed by Grenadier (1996) and the endogenous default structural model proposed by Leland and Toft (1996) to examine the interaction between lessee's...

The servicer comments are proprietary and hardly accessible; however, they can offer the single best source for real-time information of the mortgages. We utilize these comments to shed light on borrower responses to the mortgage forbearance program contained in the Coronavirus Aid, Relief, and...

We use an empirical model of commercial mortgage spreads to examine how tenant diversification impacts credit spreads for mortgages on retail properties. We find that mortgages on properties with a highly diversified tenant base have spreads that are up to 7.1 basis points higher than spreads on...

We try to estimate default and deference probabilities of commercial mortgages via an American option pricing framework. In this framework, the borrower is assumed to default either if the price of the real estate drops below the level of the outstanding loan balance or the net operating income...