Limits of arbitrage: Theory and evidence from the mortgage-backed securities market

• 成果类型: Article
• 署名作者: Gabaix, Xavier; Krishnamurthy, Arvind; Vigneron, Olivier
• 署名单位: Massachusetts Institute of Technology (MIT); National Bureau of Economic Research; Northwestern University; BNP Paribas
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2007.01217.x
• 发表日期: 2007
• 页码: 557-595
• 关键词: Valuation; MODEL; PREPAYMENT; equilibrium; RISK; constraints; volatility; prices

摘要

Limits of Arbitrage theories hypothesize that the marginal investor in a particular asset market is a specialized arbitrageur rather than a diversified representative investor. We examine the mortgage-backed securities (MBS) market in this light. We show that the risk of homeowner prepayment, which is a wash in the aggregate, is priced in the MBS market. The covariance of prepayment risk with aggregate wealth implies the wrong sign to match the observed prices of prepayment risk. The price of risk is better explained by a kernel based on MBS market-wide specific risk, consistent with the specialized arbitrageur hypothesis.