Economics Insights @ CBS

We combine data from the housing market with data from the North Carolina Sex Offender Registry to estimate how individuals value living in close proximity to a convicted criminal. We use the exact location of sex offenders to exploit variation in the threat of crime within small homogeneous groupings of homes, and we use the timing of sex offenders' arrivals to control for baseline property values in the area. We find statistically and economically significant negative effects of sex offenders' locations that are extremely localized.

Consider an economy in which the underlying security returns follow a linear factor model with constant coeffcients. While portfolios that invest in these securities will, in general, have a linear factor structure, it will be one with time-varying coeffcients. However, under certain assumptions regarding the portfolio's investment strategy, it is possible to estimate these time-varying alphas and betas.

A basket default swap is a derivative security tied to an underlying basket of corporate bonds or other assets subject to credit risk. The value of the contract depends on the joint distribution of the default times of the underlying assets. Valuing a basket default swap often entails Monte Carlo simulation of these default times. For baskets of high-quality credits and for swaps that require multiple defaults to trigger payment, pricing the swap is a rare-event simulation problem.

This paper develops rare-event simulation methods for the estimation of portfolio credit risk—the risk of losses to a portfolio resulting from defaults of assets in the portfolio. Portfolio credit risk is measured through probabilities of large losses, which are typically due to defaults of many obligors (sources of credit risk) to which a portfolio is exposed.

This article investigates the configuration of cognition- and affect-based trust in managers' professional networks, examining how these two types of trust are associated with relational content and structure. Results indicate that cognition-based trust is positively associated with economic resource, task advice, and career guidance ties, whereas affect-based trust is positively associated with friendship and career guidance ties but negatively associated with economic resource ties.