Markets bought Paulson "teaser freezer" plan

Research from the Richmond Federal Reserve shows that investors were initially optimistic that former US Treasury secretary Hank Paulson's so-called "teaser freezer" plan would improve economic conditions.

The teaser freezer, announced in December 2007, called on lenders and servicers to voluntarily alter the repayment terms of adjustable-rate subprime mortgages to stop borrowers defaulting.

By tracking the ABX index, the only source of daily securities prices in subprime mortgage markets, the

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