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Systematic and Liquidity Risk in Subprime-Mortgage Backed Securities
Dungey, M and Dwyer, GP and Flavin, T (2011) Systematic and Liquidity Risk in Subprime-Mortgage Backed Securities. Discussion Paper. School of Economics and Finance, University of Tasmania. (Unpublished)
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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 on the common factor of the �financial crisis.
|Item Type:||Report (Discussion Paper)|
|Keywords:||asset backed securities, subprime mortgages, �financial crisis, factor models, Kalman filter, RePec|
|Publisher:||School of Economics and Finance, University of Tasmania|
|Date Deposited:||15 Sep 2011 03:04|
|Last Modified:||18 Nov 2014 04:22|
|Item Statistics:||View statistics for this item|
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