Who holds the toxic waste? An investigation of CMO holdings

RePEc Short ID: pha107
ORCID iD: 0000-0001-9138-2806

Haubrich, Joseph G.; Lucas, Deborah

Discussion Paper

Who holds the toxic waste? An investigation of CMO holdings

Abstract: Toxic waste refers to the riskiest derivative structures arising from collateralized mortgage obligations (CMOs). We use simulations to predict how this risk would manifest itself in various interest rate environments. We also look for evidence on the total dollar value of these securities, who holds them, and how much they hold. Very limited public information is available, but commercial banks are required to report on their holdings, and we investigate the extent to which the risk is concentrated in that sector.

Keywords: Derivative securities; Mortgages;