File(s) under permanent embargo
Systematic and liquidity risk in subprime-mortgage backed securities
journal contribution
posted on 2023-05-17, 16:55 authored by Dungey, M, Dwyer, GP, Flavin, TThe 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.
History
Publication title
Open Economies ReviewVolume
24Pagination
5-32ISSN
0923-7992Department/School
TSBEPublisher
Kluwer Academic PublPlace of publication
Van Godewijckstraat 30, Dordrecht, Netherlands, 3311 GzRights statement
Copyright 2012 Springer Science+Business MediaRepository Status
- Restricted