Subprime Risk and Insurance with Regret

<table class="table-group" id="tab6"><tr><td><table class="table"><tr><td class="thead-hr" colspan="2"><hr/></td></tr><tr><td align="left"><span style="width: 27.387501px;"><svg height="16.225" id="M438" style="vertical-align:-0.1638pt" version="1.1" viewbox="0 0 27.387501 16.225" width="27.387501" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink">
<g transform="matrix(1.25,0,0,-1.25,90,90)">
<path d="m -71.95,67.71 5.52,0" style="fill:none;stroke:#000000;stroke-width:0.68000001;stroke-linecap:butt;stroke-linejoin:miter;stroke-miterlimit:10;stroke-opacity:1;stroke-dasharray:none"></path>
</g>
<g transform="matrix(.017,-0,0,-.017,.062,15.95)"><path d="M383 397q0 -32 -35 -49q-12 -6 -23 8q-37 45 -84 45t-90 -71q-40 -65 -40 -167q0 -57 22 -86t59 -29q38 0 81.5 24.5t69.5 51.5l16 -21q-44 -53 -104 -84t-109 -31q-56 0 -89.5 41t-33.5 117q0 61 30 124t79 105q33 28 81 50.5t86 22.5q34 0 59 -15.5t25 -35.5z" id="x1D450"></path></g>
<g transform="matrix(.012,-0,0,-.012,6.962,7.8)"><path d="M998 650l-8 -28q-71 -4 -86 -16t-22 -69l-50 -397q-3 -28 -4.5 -44t2 -29t6.5 -18.5t17 -10.5t24.5 -6.5t37.5 -3.5l-8 -28h-271l7 28q63 6 78 22t25 90l60 415h-2l-353 -552h-23l-130 536h-2l-70 -254q-44 -158 -47 -188q-5 -38 9 -51t71 -18l-6 -28h-241l8 28
q45 4 67 18.5t35 45.5q16 38 74 233l52 173q24 79 11.5 98t-89.5 26l6 28h177l136 -508l337 508h172z" id="x1D440"></path></g><g transform="matrix(.012,-0,0,-.012,19.111,7.8)"><path d="M615 290q0 -148 -114 -245q-65 -57 -125 -57q-39 0 -62 27t-29 70q-31 -41 -72 -69t-74 -28q-49 0 -82.5 43t-33.5 124q0 97 55 174.5t148 124.5l15 -24q-59 -45 -94 -113t-35 -146q0 -58 19.5 -88.5t48.5 -30.5q33 0 62 34.5t45 101.5q16 73 20 135l80 17l5 -6
q-11 -37 -23.5 -100t-12.5 -92q0 -47 16.5 -71.5t44.5 -24.5q62 0 95.5 67t33.5 160q0 107 -63 152l1 9q14 14 45 14q29 0 57.5 -44t28.5 -114z" id="x1D714"></path></g>
</svg></span></td><td align="center"> 0.102</td></tr><tr><td align="left"><span style="width: 32.775002px;"><svg height="16.9625" id="M439" style="vertical-align:-0.1638pt" version="1.1" viewbox="0 0 32.775002 16.9625" width="32.775002" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink">
<g transform="matrix(.017,-0,0,-.017,.062,16.7)"><path d="M383 397q0 -32 -35 -49q-12 -6 -23 8q-37 45 -84 45t-90 -71q-40 -65 -40 -167q0 -57 22 -86t59 -29q38 0 81.5 24.5t69.5 51.5l16 -21q-44 -53 -104 -84t-109 -31q-56 0 -89.5 41t-33.5 117q0 61 30 124t79 105q33 28 81 50.5t86 22.5q34 0 59 -15.5t25 -35.5z" id="x1D450"></path></g>
<g transform="matrix(.012,-0,0,-.012,6.962,8.537)"><path d="M594 511q0 -122 -171 -157l1 -2q158 -33 158 -159q0 -52 -34.5 -95t-90.5 -65q-76 -33 -217 -33h-223l8 28q63 5 79.5 19t26.5 72l83 426q9 48 -2.5 60t-77.5 17l6 28h259q195 0 195 -139zM499 509q0 59 -37 83t-91 24q-36 0 -51 -9q-17 -9 -22 -44l-35 -195h62
q82 0 128 37t46 104zM481 199q0 71 -48 102.5t-121 31.5h-56l-37 -201q-11 -58 7.5 -77t80.5 -19q76 0 125 44.5t49 118.5z" id="x1D435"></path></g>
<g transform="matrix(.012,-0,0,-.012,14.3,8.537)"><path d="M409 504l-29 -5q-16 60 -44.5 96t-86.5 36q-54 0 -82.5 -32t-28.5 -77q0 -51 30.5 -82.5t96.5 -65.5l35.5 -18t33 -19.5t33.5 -23.5l27 -25.5t24.5 -32t13.5 -36.5t6 -45q0 -80 -62 -134.5t-160 -54.5q-47 0 -98 15q-22 7 -50 21q-8 23 -27 155l30 7q7 -27 18 -52
t30 -51.5t49 -42.5t67 -16q56 0 88 32.5t32 87.5q0 51 -31.5 82t-98.5 67q-80 44 -110 73q-55 53 -55 124q0 75 56 126.5t150 51.5q53 0 126 -23z" id="x53"></path></g><g transform="matrix(.012,-0,0,-.012,19.785,8.537)"><path d="M518 50v-26q-32 -4 -77 -16l-37 -11t-33 -9l-6 6v71q-56 -42 -74 -52q-43 -25 -77 -25q-55 0 -89.5 36.5t-34.5 112.5v196q0 38 -6.5 48.5t-26.5 15.5l-28 6v23q19 1 72 7q59 9 71 11q-3 -31 -3 -145v-135q0 -113 88 -113q59 0 108 48v234q0 38 -8 49t-34 15l-36 6v23
q44 2 90 8q37 4 67 10v-334q0 -37 8.5 -47t38.5 -12z" id="x75"></path></g><g transform="matrix(.012,-0,0,-.012,26.056,8.537)"><path d="M152 404l81 35q23 10 41 10q81 0 139 -61.5t58 -149.5q0 -107 -74.5 -178.5t-176.5 -71.5q-71 0 -147 36v555q0 48 -9.5 59.5t-56.5 15.5v23q79 10 145 35v-308zM152 374v-258q0 -20 6 -35q7 -19 30 -37t58 -18q63 0 99.5 50t36.5 137q0 82 -43.5 131t-108.5 49
q-44 0 -78 -19z" id="x62"></path></g>
</svg></span></td><td align="center"> 0.1061</td></tr><tr><td align="left"><span style="width: 34.5px;"><svg height="16.225" id="M440" style="vertical-align:-0.1638pt" version="1.1" viewbox="0 0 34.5 16.225" width="34.5" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink">
<g transform="matrix(1.25,0,0,-1.25,90,90)">
<path d="m -71.95,67.71 5.52,0" style="fill:none;stroke:#000000;stroke-width:0.68000001;stroke-linecap:butt;stroke-linejoin:miter;stroke-miterlimit:10;stroke-opacity:1;stroke-dasharray:none"></path>
</g>
<g transform="matrix(.017,-0,0,-.017,.062,15.95)"><path d="M383 397q0 -32 -35 -49q-12 -6 -23 8q-37 45 -84 45t-90 -71q-40 -65 -40 -167q0 -57 22 -86t59 -29q38 0 81.5 24.5t69.5 51.5l16 -21q-44 -53 -104 -84t-109 -31q-56 0 -89.5 41t-33.5 117q0 61 30 124t79 105q33 28 81 50.5t86 22.5q34 0 59 -15.5t25 -35.5z" id="x1D450"></path></g>
<g transform="matrix(.012,-0,0,-.012,6.962,7.8)"><path d="M998 650l-8 -28q-71 -4 -86 -16t-22 -69l-50 -397q-3 -28 -4.5 -44t2 -29t6.5 -18.5t17 -10.5t24.5 -6.5t37.5 -3.5l-8 -28h-271l7 28q63 6 78 22t25 90l60 415h-2l-353 -552h-23l-130 536h-2l-70 -254q-44 -158 -47 -188q-5 -38 9 -51t71 -18l-6 -28h-241l8 28
q45 4 67 18.5t35 45.5q16 38 74 233l52 173q24 79 11.5 98t-89.5 26l6 28h177l136 -508l337 508h172z" id="x1D440"></path></g><g transform="matrix(.012,-0,0,-.012,19.111,7.8)"><path d="M570 168l-39 -168h-498v23l262 301l-248 304v22h471q4 -71 11 -146l-29 -4q-17 65 -37 88q-12 15 -36 20.5t-79 5.5h-181l211 -256l-243 -287h280q51 0 77 20.5t49 83.5z" id="x3A3"></path></g><g transform="matrix(.012,-0,0,-.012,26.227,7.8)"><path d="M615 290q0 -148 -114 -245q-65 -57 -125 -57q-39 0 -62 27t-29 70q-31 -41 -72 -69t-74 -28q-49 0 -82.5 43t-33.5 124q0 97 55 174.5t148 124.5l15 -24q-59 -45 -94 -113t-35 -146q0 -58 19.5 -88.5t48.5 -30.5q33 0 62 34.5t45 101.5q16 73 20 135l80 17l5 -6
q-11 -37 -23.5 -100t-12.5 -92q0 -47 16.5 -71.5t44.5 -24.5q62 0 95.5 67t33.5 160q0 107 -63 152l1 9q14 14 45 14q29 0 57.5 -44t28.5 -114z" id="x1D714"></path></g>
</svg></span></td><td align="center"> 0.0988</td></tr><tr><td align="left"><span style="width: 43.224998px;"><svg height="16.424999" id="M441" style="vertical-align:-0.1638pt" version="1.1" viewbox="0 0 43.224998 16.424999" width="43.224998" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink">
<g transform="matrix(1.25,0,0,-1.25,90,90)">
<path d="m -71.95,67.55 5.52,0" style="fill:none;stroke:#000000;stroke-width:0.68000001;stroke-linecap:butt;stroke-linejoin:miter;stroke-miterlimit:10;stroke-opacity:1;stroke-dasharray:none"></path>
</g>
<g transform="matrix(.017,-0,0,-.017,.062,16.162)"><path d="M383 397q0 -32 -35 -49q-12 -6 -23 8q-37 45 -84 45t-90 -71q-40 -65 -40 -167q0 -57 22 -86t59 -29q38 0 81.5 24.5t69.5 51.5l16 -21q-44 -53 -104 -84t-109 -31q-56 0 -89.5 41t-33.5 117q0 61 30 124t79 105q33 28 81 50.5t86 22.5q34 0 59 -15.5t25 -35.5z" id="x1D450"></path></g>
<g transform="matrix(.012,-0,0,-.012,6.962,8)"><path d="M998 650l-8 -28q-71 -4 -86 -16t-22 -69l-50 -397q-3 -28 -4.5 -44t2 -29t6.5 -18.5t17 -10.5t24.5 -6.5t37.5 -3.5l-8 -28h-271l7 28q63 6 78 22t25 90l60 415h-2l-353 -552h-23l-130 536h-2l-70 -254q-44 -158 -47 -188q-5 -38 9 -51t71 -18l-6 -28h-241l8 28
q45 4 67 18.5t35 45.5q16 38 74 233l52 173q24 79 11.5 98t-89.5 26l6 28h177l136 -508l337 508h172z" id="x1D440"></path></g><g transform="matrix(.012,-0,0,-.012,19.111,8)"><path d="M570 168l-39 -168h-498v23l262 301l-248 304v22h471q4 -71 11 -146l-29 -4q-17 65 -37 88q-12 15 -36 20.5t-79 5.5h-181l211 -256l-243 -287h280q51 0 77 20.5t49 83.5z" id="x3A3"></path></g><g transform="matrix(.012,-0,0,-.012,26.227,8)"><path d="M615 290q0 -148 -114 -245q-65 -57 -125 -57q-39 0 -62 27t-29 70q-31 -41 -72 -69t-74 -28q-49 0 -82.5 43t-33.5 124q0 97 55 174.5t148 124.5l15 -24q-59 -45 -94 -113t-35 -146q0 -58 19.5 -88.5t48.5 -30.5q33 0 62 34.5t45 101.5q16 73 20 135l80 17l5 -6
q-11 -37 -23.5 -100t-12.5 -92q0 -47 16.5 -71.5t44.5 -24.5q62 0 95.5 67t33.5 160q0 107 -63 152l1 9q14 14 45 14q29 0 57.5 -44t28.5 -114z" id="x1D714"></path></g><g transform="matrix(.012,-0,0,-.012,33.818,8)"><path d="M716 28l-8 -28h-254l8 28q55 5 66 17.5t5 47.5l-30 145h-232l-74 -138q-21 -43 -11 -54.5t72 -17.5l-6 -28h-235l8 28q53 7 73.5 21t53.5 70l319 540l33 8q6 -43 33 -176l80 -381q10 -49 26.5 -63t72.5 -19zM495 281l-49 264h-2l-149 -264h200z" id="x1D434"></path></g>
</svg></span></td><td align="center"> 0.1008</td></tr><tr><td align="left">Reference mortgage portfolio value at <svg height="16.225" id="M442" style="vertical-align:-0.1638pt" version="1.1" viewbox="0 0 27.387501 16.225" width="27.387501" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink">
<g transform="matrix(1.25,0,0,-1.25,90,90)">
<path d="m -71.95,67.71 5.52,0" style="fill:none;stroke:#000000;stroke-width:0.68000001;stroke-linecap:butt;stroke-linejoin:miter;stroke-miterlimit:10;stroke-opacity:1;stroke-dasharray:none"></path>
</g>
<g transform="matrix(.017,-0,0,-.017,.062,15.95)"><path d="M383 397q0 -32 -35 -49q-12 -6 -23 8q-37 45 -84 45t-90 -71q-40 -65 -40 -167q0 -57 22 -86t59 -29q38 0 81.5 24.5t69.5 51.5l16 -21q-44 -53 -104 -84t-109 -31q-56 0 -89.5 41t-33.5 117q0 61 30 124t79 105q33 28 81 50.5t86 22.5q34 0 59 -15.5t25 -35.5z" id="x1D450"></path></g>
<g transform="matrix(.012,-0,0,-.012,6.962,7.8)"><path d="M998 650l-8 -28q-71 -4 -86 -16t-22 -69l-50 -397q-3 -28 -4.5 -44t2 -29t6.5 -18.5t17 -10.5t24.5 -6.5t37.5 -3.5l-8 -28h-271l7 28q63 6 78 22t25 90l60 415h-2l-353 -552h-23l-130 536h-2l-70 -254q-44 -158 -47 -188q-5 -38 9 -51t71 -18l-6 -28h-241l8 28
q45 4 67 18.5t35 45.5q16 38 74 233l52 173q24 79 11.5 98t-89.5 26l6 28h177l136 -508l337 508h172z" id="x1D440"></path></g><g transform="matrix(.012,-0,0,-.012,19.111,7.8)"><path d="M615 290q0 -148 -114 -245q-65 -57 -125 -57q-39 0 -62 27t-29 70q-31 -41 -72 -69t-74 -28q-49 0 -82.5 43t-33.5 124q0 97 55 174.5t148 124.5l15 -24q-59 -45 -94 -113t-35 -146q0 -58 19.5 -88.5t48.5 -30.5q33 0 62 34.5t45 101.5q16 73 20 135l80 17l5 -6
q-11 -37 -23.5 -100t-12.5 -92q0 -47 16.5 -71.5t44.5 -24.5q62 0 95.5 67t33.5 160q0 107 -63 152l1 9q14 14 45 14q29 0 57.5 -44t28.5 -114z" id="x1D714"></path></g>
</svg></td><td align="center"> 1</td></tr><tr><td align="left">Reference mortgage portfolio value at <svg height="16.424999" id="M443" style="vertical-align:-0.1638pt" version="1.1" viewbox="0 0 43.224998 16.424999" width="43.224998" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink">
<g transform="matrix(1.25,0,0,-1.25,90,90)">
<path d="m -71.95,67.55 5.52,0" style="fill:none;stroke:#000000;stroke-width:0.68000001;stroke-linecap:butt;stroke-linejoin:miter;stroke-miterlimit:10;stroke-opacity:1;stroke-dasharray:none"></path>
</g>
<g transform="matrix(.017,-0,0,-.017,.062,16.162)"><path d="M383 397q0 -32 -35 -49q-12 -6 -23 8q-37 45 -84 45t-90 -71q-40 -65 -40 -167q0 -57 22 -86t59 -29q38 0 81.5 24.5t69.5 51.5l16 -21q-44 -53 -104 -84t-109 -31q-56 0 -89.5 41t-33.5 117q0 61 30 124t79 105q33 28 81 50.5t86 22.5q34 0 59 -15.5t25 -35.5z" id="x1D450"></path></g>
<g transform="matrix(.012,-0,0,-.012,6.962,8)"><path d="M998 650l-8 -28q-71 -4 -86 -16t-22 -69l-50 -397q-3 -28 -4.5 -44t2 -29t6.5 -18.5t17 -10.5t24.5 -6.5t37.5 -3.5l-8 -28h-271l7 28q63 6 78 22t25 90l60 415h-2l-353 -552h-23l-130 536h-2l-70 -254q-44 -158 -47 -188q-5 -38 9 -51t71 -18l-6 -28h-241l8 28
q45 4 67 18.5t35 45.5q16 38 74 233l52 173q24 79 11.5 98t-89.5 26l6 28h177l136 -508l337 508h172z" id="x1D440"></path></g><g transform="matrix(.012,-0,0,-.012,19.111,8)"><path d="M570 168l-39 -168h-498v23l262 301l-248 304v22h471q4 -71 11 -146l-29 -4q-17 65 -37 88q-12 15 -36 20.5t-79 5.5h-181l211 -256l-243 -287h280q51 0 77 20.5t49 83.5z" id="x3A3"></path></g><g transform="matrix(.012,-0,0,-.012,26.227,8)"><path d="M615 290q0 -148 -114 -245q-65 -57 -125 -57q-39 0 -62 27t-29 70q-31 -41 -72 -69t-74 -28q-49 0 -82.5 43t-33.5 124q0 97 55 174.5t148 124.5l15 -24q-59 -45 -94 -113t-35 -146q0 -58 19.5 -88.5t48.5 -30.5q33 0 62 34.5t45 101.5q16 73 20 135l80 17l5 -6
q-11 -37 -23.5 -100t-12.5 -92q0 -47 16.5 -71.5t44.5 -24.5q62 0 95.5 67t33.5 160q0 107 -63 152l1 9q14 14 45 14q29 0 57.5 -44t28.5 -114z" id="x1D714"></path></g><g transform="matrix(.012,-0,0,-.012,33.818,8)"><path d="M716 28l-8 -28h-254l8 28q55 5 66 17.5t5 47.5l-30 145h-232l-74 -138q-21 -43 -11 -54.5t72 -17.5l-6 -28h-235l8 28q53 7 73.5 21t53.5 70l319 540l33 8q6 -43 33 -176l80 -381q10 -49 26.5 -63t72.5 -19zM495 281l-49 264h-2l-149 -264h200z" id="x1D434"></path></g>
</svg></td><td align="center"> 1.0084</td></tr><tr><td align="left"><span style="width: 23.325001px;"><svg height="13.6125" id="M444" style="vertical-align:-0.0pt" version="1.1" viewbox="0 0 23.325001 13.6125" width="23.325001" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink">
<g transform="matrix(.017,-0,0,-.017,.062,13.55)"><path d="M764 650l-7 -26q-61 -10 -91.5 -22.5t-76.5 -48.5l-235 -184q104 -152 208 -276q31 -37 54.5 -48.5t68.5 -16.5l-7 -28h-156q-138 170 -213 284q-19 29 -33.5 35t-33.5 -7l-29 -173q-15 -75 -5.5 -90.5t74.5 -20.5l-5 -28h-260l7 28q58 5 74 21.5t30 89.5l70 378
q12 68 2 83t-72 22l6 28h257l-7 -28q-62 -7 -76 -21.5t-27 -83.5l-32 -172q29 11 78 46q112 84 217 179q18 16 23.5 25.5t-1 14.5t-26.5 8l-30 4l5 28h249z" id="x1D43E"></path></g>
<g transform="matrix(.012,-0,0,-.012,13.25,5.388)"><path d="M391 364q0 -28 -20.5 -53.5t-50 -43.5t-70 -34t-73.5 -25t-68 -17v-29q0 -48 20 -81t65 -33q73 0 157 76l16 -23q-107 -113 -221 -113q-21 0 -40.5 6.5t-39 22t-31.5 47t-12 75.5q0 69 33.5 139.5t95.5 114.5q77 55 143 55q42 0 69 -24.5t27 -59.5zM313 350
q0 26 -14.5 40.5t-37.5 14.5q-32 0 -44 -7q-82 -46 -104 -175q200 49 200 127z" id="x1D452"></path></g><g transform="matrix(.012,-0,0,-.012,18.176,5.388)"><path d="M352 391q0 -31 -27 -44q-14 -7 -24 6q-39 48 -84 48q-23 0 -39.5 -15t-16.5 -40q0 -43 73 -90q49 -32 70 -58t21 -57q0 -58 -62 -105.5t-129 -47.5q-40 0 -75.5 25t-35.5 52q0 28 32 46q7 4 15 3t11 -6q19 -31 48.5 -50.5t54.5 -19.5q34 0 54 19.5t20 42.5q0 43 -65 81
q-97 56 -97 123q0 50 51 96q19 17 58 32.5t62 15.5q37 0 61 -18t24 -39z" id="x1D460"></path></g>
</svg></span></td><td align="center"> 0.0084</td></tr><tr class="table-tr"><td colspan="2"><hr class="tbody-hr"/></td></tr></table></td></tr></table>

Costs and benefits from mortgage securitization.

Discrete Dynamics in Nature and Society

tab6

Table 6

Table 6: Subprime Risk and Insurance with Regret 