Before revision:  We characterize the unique equilibrium of our model through a Hamilton-Jacobi-Bellman equation of a novel form and use it to derive several comparative statics results .
After revision:  We characterize the unique equilibrium of our model through a Hamilton-Jacobi-Bellman equation of a novel form quantifies precisely the influence of the costs-of-carry on the price. An unexpected decrease in shorting costs may lead to the collapse of a bubble; this links the financial innovations that facilitated shorting of MBSs to the subsequent collapse of prices .