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The ABX: how do the markets price subprime mortgage risk?

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Author Info
Ingo Fender
Martin Scheicher
Abstract

The ABX family of indices has become a key barometer of subprime mortgage market conditions during the recent financial crisis. Simple regression analysis illustrates the relationship between observed index returns and proxies of default risk, interest rates, market liquidity and risk appetite. The results suggest that declining risk appetite and heightened concerns about market illiquidity have provided a sizeable contribution to the observed collapse in ABX prices since the summer of 2007.

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Publisher Info
Article provided by Bank for International Settlements in its journal BIS Quarterly Review.

Volume (Year): (2008)
Issue (Month): (September)
Pages:
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Handle: RePEc:bis:bisqtr:0809h

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Find related papers by JEL classification:
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Bruce Mizrach, 2008. "Jump and Cojump Risk in Subprime Home Equity Derivatives," Departmental Working Papers 200802, Rutgers University, Department of Economics.
  2. Michael J. Fleming & Eli M. Remolona, 1997. "What moves the bond market?," Research Paper 9706, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  3. Prasanna Gai & Nicholas Vause, 2006. "Measuring Investors' Risk Appetite," International Journal of Central Banking, International Journal of Central Banking, vol. 2(1), March. [Downloadable!]
  4. Adam B. Ashcraft & Til Schuermann, 2008. "Understanding the securitization of subprime mortgage credit," Staff Reports 318, Federal Reserve Bank of New York. [Downloadable!]
  5. Pierre Collin-Dufresne, 2001. "The Determinants of Credit Spread Changes," Journal of Finance, American Finance Association, vol. 56(6), pages 2177-2207, December. [Downloadable!] (restricted)
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This page was last updated on 2009-12-4.

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