An Empirical Analysis of Asset-Backed Securitization
AbstractIn this study we provide empirical evidence demonstrating a relationship between the nature of the assets and the primary market spread. The model also provides predictions on how other pricing characteristics affect spread, since little is known about how and why spreads of asset-backed securities are influenced by loan tranche characteristics. We find that default and recovery risk characteristics represent the most important group in explaining loan spread variability. Within this group, the credit rating dummies are the most important variables to determine loan spread at issue. Nonetheless, credit rating is not a sufficient statistic for the determination of spreads. We find that the nature of the assets has a substantial impact on the spread across all samples, indicating that primary market spread with backing assets that cannot easily be replaced is significantly higher relative to issues with assets that can easily be obtained. Of the remaining characteristics, only marketability explains a significant portion of the spreads’ variability. In addition, variations of the specifications were estimated in order to asses the robustness of the conclusions concerning the determinants of loan spreads.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 10382.
Date of creation: 28 Aug 2007
Date of revision: 25 Aug 2008
asset securitization; asset-backed securitisation; bank lending; default risk; risk management; leveraged financing;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G20 - Financial Economics - - Financial Institutions and Services - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-28 (All new papers)
- NEP-CFN-2008-10-28 (Corporate Finance)
- NEP-FMK-2008-10-28 (Financial Markets)
- NEP-RMG-2008-10-28 (Risk Management)
- NEP-URE-2008-10-28 (Urban & Real Estate Economics)
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