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Systematic and Liquidity Risk in Subprime-Mortgage Backed Securities
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Dungey, M, Dwyer, GP and Flavin, T 2011
, Systematic and Liquidity Risk in Subprime-Mortgage Backed Securities.
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DP2011_06_Dunge...pdf | Download (1MB) Available under University of Tasmania Standard License. |
Abstract
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) |
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Authors/Creators: | Dungey, M and Dwyer, GP and Flavin, T |
Keywords: | asset backed securities, subprime mortgages, �financial crisis, factor models, Kalman filter, RePec |
Publisher: | School of Economics and Finance, University of Tasmania |
Item Statistics: | View statistics for this item |
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