Consistent with the Minsky hypothesis and the “volatility paradox” (Brunnermeier and Sannikov, 2014), recent empirical evidence suggests that financial crises tend to follow prolonged periods of financial stability and investor optimism. But does financial stability/tranquility always call...

Using a screening model with asymmetric information, I evaluate the positive and normative effects of the subsidized default insurance policy in the U.S. mortgage market. The model implies that the subsidy raises interest rates for eligible mortgages, which is contrary to conventional wisdom but...

It is of vital importance to better understand the US housing market, a market where the global financial crisis was originated from. In this paper, we build an infinite-horizon continuous-time structural model to study the effects of the long-standing and widespread Government-Sponsored...

I empirically evaluate the subsidized default insurance policy (implemented through the guarantee for Government-Sponsored Enterprises) in the U.S. mortgage market. First, I find that the subsidy has raised mortgage interest rates for all loans strictly eligible for the subsidy (conforming...