Flavin, Thomas and Dwyer, Patrick and Dungey, Mardi (2011) Systematic and Liquidity Risk in Subprime-Mortgage Backed Securities. Working Paper. NUI Maynooth. (Unpublished)

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Abstract

Abstract The misevaluation of risk in securitized …nancial products is central to understand- ing the Financial Crisis of 2007-2008. This paper characterizes the evolution of factors a¤ecting 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 e¤ect, 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 e¤ects on the common factor of the …nancial crisis.

Item Type:	Monograph (Working Paper)
Keywords:	asset backed securities; subprime mortgages; nancial crisis; factor mod- els; Kalman lter;
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	2825
Depositing User:	Thomas Flavin
Date Deposited:	15 Nov 2011 11:46
Publisher:	NUI Maynooth
URI:
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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