Search Results
Showing results 1 to 2 of approximately 2.
(refine search)
Conference Paper
Vintage and credit rating: what matters in the ABX data during the credit crunch?
The mortgage backed securities market has dramatically declined during the credit crunch of 2007-2008. To understand the factors driving its demise we utilise a latent factor model representing common effects, asset rating effects, vintage of issuance effects and liquidity effects - extending the recent representation of CDO pricing in Longstaff and Rajan (2008). Common and liquidity effects are shown to have an increasing influence on the performance of the ABX-HE indices, with the role of vintage factors changing dramatically over the sample period of January 2006 to May 2008. Consistent ...
Working Paper
Systematic and liquidity risk in subprime-mortgage backed securities
The misevaluation of risk in securitized financial products is central to understanding the financial crisis of 2007?8. This paper characterizes the evolution of factors affecting collateralized debt obligations based on subprime mortgages. A key feature of subprime-mortgage backed indices is that they are distinct in their vintage of issuance. Using a latent factor framework that incorporates this vintage effect, we show the increasing importance of a common factor on more senior tranches during the crisis. We examine this common factor and its relationship with spreads. We estimate the ...