Systematic and liquidity risk in subprime-mortgage backed securities

Arbeitspapier

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 effects on the common factor of the financial crisis.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2011-15

Classification and Topics

• Classification: Wirtschaft ; Asset Pricing; Trading Volume; Bond Interest Rates ; Financial Crises ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Subject: asset-backed securities ; subprime mortgages ; financial crisis ; factor models ; Kalman filter ; Asset-backed security ; Subprime-Hypothek ; Marktliquidität ; Systemrisiko ; Finanzmarktkrise ; Zustandsraummodell ; Schätzung ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dungey, Mardi ; Dwyer, Gerald P. ; Flavin, Thomas
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Atlanta
• (where): Atlanta, GA
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/70653
• Last update: 10.03.2025, 11:42 AM CET