Efficient Mortgage Default Option Exercise: Evidence from Loss Severity

This paper extends options-based mortgage default theory to include transaction costs. When transaction costs are considered, the rational borrower will default only when the value of the collateral falls below the mortage value by an amount equal to the net transaction costs. Since, for most borrowers, net transaction costs are positive, standard measures of equity may be significantly negative by the time the rational borrower exercises the default option. This research shows theoretically and empirically the effects of frictions on the individual strike price. The addition of transaction costs to the theory provides several testable implications for equity loss severity. First, the longer the foreclosure process and the period of free rent to the borrower, the lower the severity. Second, severity will be smaller when bankruptcy has been declared. Third, severity is decreasing in the contract decreasing function of the probability of a deficiency judgment. The empirical results, using servicing and foreclosure data from a large northeastern thrift, support the theoretical model.

Welfare Rankings From Multivariate Data, A Non-Parametric Approach

Economic and Social Welfare is inherently multidimensional. However choosing a measure which combines several indicators is difficult and may have unintended and undesireable effects on the incentives for policymakers. We develope a nonparametric empirical method for deriving welfare rankings based on data envelopment which avoids the need to specify a weighting scheme. The results are valid for all possible social welfare functions which share certain cannonical properties. We apply this method to data on human development.Welfare Rankings, Data Envelopment, Human development

Undermining Western democracy promotion in Central Asia:China’s countervailing influences, powers and impact

This article examines whether and to what extent China’s involvement in Central Asian countries undermines the democracy promotion efforts of the European Union and the United States. Findings confirm that China does indeed challenge Western efforts, but in an indirect way. First, Chinese provision of substantial and unconditional financial assistance makes Western politically conditioned aid appear both ungenerous and an infringement of sovereignty. Second, the Shanghai Co-operation Organisation, inclusive of China’s leadership role, creates an institutional means through which the (semi-)authoritarianism of member states is legitimized and challenges Western emphasis on democracy and human rights. Finally, by the power of its own example, China demonstrates that democracy is not a prerequisite for prosperity, the rule of law and social well-being

Spontaneous Isotropy Breaking: A Mechanism for CMB Multipole Alignments

We introduce a class of models in which statistical isotropy is broken spontaneously in the CMB by a non-linear response to long-wavelength fluctuations in a mediating field. These fluctuations appear as a gradient locally and pick out a single preferred direction. The non-linear response imprints this direction in a range of multipole moments. We consider two manifestations of isotropy breaking: additive contributions and multiplicative modulation of the intrinsic anisotropy. Since WMAP exhibits an alignment of power deficits, an additive contribution is less likely to produce the observed alignments than the usual isotropic fluctuations, a fact which we illustrate with an explicit cosmological model of long-wavelength quintessence fluctuations. This problem applies to other models involving foregrounds or background anisotropy that seek to restore power to the CMB. Additive models that account directly for the observed power exacerbate the low power of the intrinsic fluctuations. Multiplicative models can overcome these difficulties. We construct a proof of principle model that significantly improves the likelihood and generates stronger alignments than WMAP in 30-45% of realizations.Comment: 13 pages, 10 figure

Strengthening Unarmed Community Self-protection in Cameroon's Anglophone Conflict

This brief discusses the innovative unarmed civilian self-protection strategies employed by individuals, groups and communities affected by the armed conflict and their accompanying challenges. In doing so, it not only emphasises the urgency in finding sustainable solution to the conflict, but equally demonstrates the resilience, resourcefulness, and pro-activeness of civilians in protecting themselves in violent contexts. Some key recommendations are provided for future policy and programmatic interventions