Peer-Reviewed Journal Details
Mandatory Fields
Dungey, M;Dwyer, GP;Flavin, T
2013
February
Open Economies Review
Systematic and Liquidity Risk in Subprime-Mortgage Backed Securities
Published
5 ()
Optional Fields
CREDIT RISK FINANCE MODELS CRISIS US
24
1
5
32
The misevaluation of risk in securitized financial products is central to understanding the Financial Crisis of 2007-2008. This paper characterizes the evolution of factors affecting collateralized debt obligations (CDOs) 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 effects of the financial crisis on the common factor.
DORDRECHT
0923-7992
http://rdcu.be/mD27
10.1007/s11079-012-9254-4
Grant Details