ABS, MBS and CDO compared: an empirical analysis
AbstractThe capital market in which asset-backed securities are issued and traded is composed of three main categories: ABS, MBS and CDOs. We were able to examine a total number of 3,466 loans (worth €548.85 billion) of which 1,102 (worth €163.90 billion) have been classified as ABS. MBS issues represent 1,782 issues (worth €320.83 billion), and 582 are CDO issues (worth €64.12 billion). We have investigated how common pricing factors compare for the main classes of securities. Due to the differences in the assets related to these securities, the relevant pricing factors for these securities should differ, too. Taking these three classes as a whole, we have documented that the assets attached as collateral for the securities differ between security classes, but that there are also important univariate differences to consider. We found that most of the common pricing characteristics between ABS, MBS and CDO differ significantly. Furthermore, applying the same pricing estimation model to each security class revealed that most of the common pricing characteristics associated with these classes have a different impact on the primary market spread exhibited by the value of the coefficients. The regression analyses we performed suggest that ABS, MBS and CDOs are in fact different instruments, as implied by the differences in impact of the pricing factors on the loan spread between these security classes.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 10381.
Date of creation: 28 Aug 2007
Date of revision: 09 Sep 2008
Publication status: Published in The Journal of Structured Finance 2.14(2008): pp. 27-45
asset securitization; asset-backed securitisation; bank lending; default risk; risk management; spreads; leveraged financing;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G0 - Financial Economics - - General
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-28 (All new papers)
- NEP-RMG-2008-10-28 (Risk Management)
- NEP-URE-2008-10-28 (Urban & Real Estate Economics)
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