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Dungey, Mardi, Dwyer, Gerald P. and Flavin, Thomas (2013) Systematic and Liquidity Risk in Subprime-Mortgage Backed Securities. Open Economies Review, 24. pp. 5-32. ISSN 0923-7992
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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 of the financial crisis on the common factor.
| Item Type: | Article |
|---|---|
| Keywords: | Asset backed securities; Subprime mortgages; Financial crisis; Factor; models; Kalman filter; |
| Academic Unit: | Faculty of Social Sciences > Economics, Finance and Accounting |
| Item ID: | 7990 |
| Identification Number: | 10.1007/s11079-012-9254-4 |
| Depositing User: | Thomas Flavin |
| Date Deposited: | 07 Mar 2017 12:29 |
| Journal or Publication Title: | Open Economies Review |
| Publisher: | Springer Verlag |
| Refereed: | Yes |
| Related URLs: | |
| URI: | https://mural.maynoothuniversity.ie/id/eprint/7990 |
| 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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