Valuing Homeownership

Housing tenure decision combines financial, economic and socio-psychological factors. This paper considers the global premium associated to homeownership. On the one hand, homeownership is associated to private benefits of being an owner. On the other hand, overinvestment in housing is harmful to diversification and distorts portfolio management. This trade-off, similar to the one associated to corporate private benefits of control, is the cornerstone of our theoretical model based on the expected utility maximization. The originality of the model comes from its simplicity. Furthermore, the empirical implementation of the model, using price and rent data normalized by square-meter, exhibits a homeownership premium for houses in the Brussels Region reaching at least 9% of the housing price. The findings are robust to several methodological refinements. In particular, they confirm the link between liquidity constraints and house prices documented in the literature. However, the premium may largely vary from one place to another, according to tax laws, cultural habits and social status associated to tenure.     

Valuing Core Deposits

While the financial crisis has brought to the fore valuation of bank assets, equally important to a bank’s long-term health is the quality of its deposits. This paper employs bank-specific data on total and retained balances to value so-called core deposits: checking and savings and money market accounts. The empirical results indicate that core deposits have considerable value to financial institutions, often dramatically more than regulators have allowed. The empirical results also indicate that the value of core deposits varies substantially by institution. For some institutions the value of core deposits approaches the total value of the institution. I am grateful to Rob Battalio, Tom Cosimano, Dave Hutchison, Bill McGuire and seminar participants at the University of Notre Dame for their comments on earlier drafts. I am particularly grateful to an anonymous referee whose suggestions substantially improved the paper. Any remaining limitations are entirely my responsibility.     

Valuing reload options

Over the past quarter century, the use of stock options as pay for performance has grown enormously. Option grants now account for 32% of CEO pay—more than twice that of salaries. In addition options are now being granted to many more employees than before. During this same time period, there have been numerous innovations in the features on compensation options. One of these features is the reload—the grant of new options to replace shares tendered in the payment of the exercise. Within the past year, the long-delayed FASB requirement that options be expensed for financial reporting has finally become a fact. It is incumbent upon financial researchers to provide methods to achieve the goal of valuing options, not only to serve the accounting needs, but also to provide ways of determining their true costs and incentive effects. This paper analyzes the various forms of reload options and provides simple Black-Scholes like formulas for evaluating them. JEL Classification G13     

Valuing Equity-Indexed Annuities

Abstract

Equity-indexed annuities have generated a great deal of interest and excitement among both insurers and their customers since they were first introduced to the marketplace in early 1995. Because of the embedded options in these products, the insurers are presented with some challenging mathematical problems when it comes to the pricing and management of equity indexed annuities. This paper explores the pricing aspect of three of the most common product designs: the point-to-point, the cliquet, and the lookback. Based on certain assumptions, we are able to present the pricing formulas in closed form for the three product designs. The method of Esscher transforms is the fundamental tool for pricing such deferred annuities.     

抑制通胀要“突出”

当前,我国宏观调控首要任务已经发生变化：由上半年的“防过热、防通胀”转为“一保一控”,即把保持经济平稳较快发展、控制物价过快上涨作为宏观调控的首要任务。同时,把抑制通货膨胀放在“突出”位置。这是7月25日,中央政治局会议在研究当前经济形势时,作出的新的重大决策,传递出中央对确保未来经济稳定增长的决心,也指明了下一步抑制通货膨胀的方向和重点。     

抑制通账要“突出”

当前,我国宏观调控首要任务已经发生变化:由上半年的防过热、防通胀转为一保一控,即把保持经济平稳较快发展、控制物价过快上涨作为宏观     

美国富豪的呼吁

200名美国富翁给奥巴马和参众两院议长发联名信,主动要求对年收入100万美元以上的人加税。这样的事情是不是让你听起来有些荒诞?不可思议的公车上书事实上,这样联名自愿加税在美国早已有先例,在小布什签署取消遗产税法案时,包括比尔·盖茨的父亲、洛克菲勒等120名美国富豪,就搞过这么一回公车上书。美国的富豪们为何对自己下如此狠手?     

把抑制通胀放在突出位置

非常荣幸受邀来到美丽的布宜诺斯艾利斯参加本次研讨会。当前全球经济整体增速放缓、通货膨胀压力上升、金融市场动荡加剧，各经济体面临保持增长和抑制通胀的两难选择。我很高兴能够就中国所面临的挑战及采取的对策同在座诸位进行坦诚地交流。     

Valuing and pricing IPOs

This paper investigates how underwriters set the IPO firm’s fair value, an ex-ante estimate of the market value, using a unique dataset of 228 reports from French underwriters. These reports are issued before the IPO shares start trading on the stock market and detail how underwriters determined fair value. We document that underwriters often employ multiples valuation, dividend discount models and discounted cash flow (DCF) analysis to determine fair value but that all of these valuation methods suffer from a positive bias with respect to equilibrium market value. We also analyze how this fair value estimate is subsequently used as a basis for IPO pricing. We report that underwriters deliberately discount the fair value estimate when setting the preliminary offer price. Part of the intentional price discount can be recovered by higher price updates. We find that, controlling for other factors such as investor demand, part of underpricing stems from this intentional price discount.     

Valuing mortgage loan servicing

We develop an intertemporal model for valuing mortgage loan servicing contracts. The model includes a stochastic short-term interest rate and realized inflation rate which jointly determine the current mortgage coupon rate, the mortgagor's prepayment decision, the servicer's future net cash flows, and the rate at which to discount these future cash flows. Several potential uses of the model for institutions that service mortgages and trade servicing portfolios are illustrated by the application of the model to servicing fixed-rate mortgages and adjustable-rate mortgages. The model also is applicable to regulatory issues and to the servicing of other types of loans.The authors gratefully acknowledge support from the Federal Home Loan Bank Board, Washington, D.C., the Purdue Research Foundation, West Lafayette, Indiana, and the Richard D. Irwin Foundation, Homewood, Illinois.     

金融调控楼市遏制房价

一如年后的寒风凛冽,2010年元旦之后的中国楼市正式迎米了全面调整时期.除去京沪深穗等中心城市的楼市量缩价凋以外,更为重要的是中央决策层对十楼市金融凋控政策口趋收紧.     

制度创新遏制行政不作为

行政的关键在于"行".而当今社会,行政不作为却成为行政执法中的"幽灵".从理论上廓清行政不作为的形成原因,从实践上扫除行政不作为的恶劣表现,对于强化中央权威,推进科学发展观的进一步实现意义重大.本文在对行政不作为的形成原因作简要概述之后,重点讨论如何通过制度创新来有效遏制行政不作为.