Anderson Graduate School of Management at U.C.L.A. We thank Sushil Bikhchandani, Olivier Ledoit, Richard Roll, Richard Stanton, René Stulz, and two anonymous referees for valuable comments.
The Valuation of Complex Derivatives by Major Investment Firms: Empirical Evidence
Article first published online: 18 APR 2012
1997 The American Finance Association
The Journal of Finance
Volume 52, Issue 2, pages 785–798, June 1997
How to Cite
BERNARDO, A. E. and CORNELL, B. (1997), The Valuation of Complex Derivatives by Major Investment Firms: Empirical Evidence. The Journal of Finance, 52: 785–798. doi: 10.1111/j.1540-6261.1997.tb04821.x
- Issue published online: 18 APR 2012
- Article first published online: 18 APR 2012
This article examines the auction of a portfolio of collateralized mortgage obligations (CMOs) to major broker dealers and institutional investors. The unique data set allows us to analyze a number of important empirical questions related to the valuation of CMOs by the bidders and the elasticity of demand for the securities. The results reveal that the valuations differ substantially implying a significant elasticity of demand.