We study optimal securitization when the secondary market has cheapest-to-deliver pricing. More specifically, we study theoretically and empirically how lenders pool mortgages to create agency mortgage-backed securities (MBS) taking into account how To-Be-Announced (TBA) markets operate. First,...

We present a dynamic structural model of subprime adjustable-rate mortgage (ARM) borrowers making payment decisions taking into account possible consequences of different degrees of delinquency from their lenders. We empirically implement the model using unique data sets that contain information...