IDEAS home Printed from https://ideas.repec.org/a/fip/fedfpr/y2009ijanx10.html
   My bibliography  Save this article

A model of CMBS spreads

Author

Listed:
  • Joseph B. Nichols
  • Amy Cunningham

Abstract

The market for securitized commercial mortgages is still fairly new, dating back only to the mid-1990s. As the market developed, and both rating agencies and investors became more comfortable with the product and the associated risks, the level of credit support behind given tranches steadily declined. At the same time on-the-run spreads also declined. This paper develops a series of models of both on-the-run CMBS spreads and spreads on newly-issued CMBS. Unlike the on-the run spreads, we can observed differences in credit quality and credit support for the newly-issued securities and therefore identify the the marginal cost investors assigned to these measures of credit quality and credit support. We then use the model to see if the marginal cost assigned to these measures of MBS credit quality and credit support significantly changed after the 9/11 attacks increased the perceived risk associated with commercial real estate, the passage and extension of the Terrorism Risk Insurance Act, and the turmoil in structured credit markets in 2007.

Suggested Citation

  • Joseph B. Nichols & Amy Cunningham, 2009. "A model of CMBS spreads," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
  • Handle: RePEc:fip:fedfpr:y:2009:i:jan:x:10
    as

    Download full text from publisher

    File URL: http://www.frbsf.org/economics/conferences/0901/Nichols-Cunningham.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Kent Smetters, 2005. "Insuring Against Terrorism: The Policy Challenge," NBER Working Papers 11038, National Bureau of Economic Research, Inc.
    2. Ambrose, Brent W & Sanders, Anthony B, 2003. "Commercial Mortgage-Backed Securities: Prepayment and Default," The Journal of Real Estate Finance and Economics, Springer, vol. 26(2-3), pages 179-196, March-May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Contessi, Silvio & De Pace, Pierangelo & Guidolin, Massimo, 2014. "How did the financial crisis alter the correlations of U.S. yield spreads?," Journal of Empirical Finance, Elsevier, vol. 28(C), pages 362-385.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedfpr:y:2009:i:jan:x:10. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Federal Reserve Bank of San Francisco Research Library). General contact details of provider: http://edirc.repec.org/data/frbsfus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.