Systematic and Liquidity Risk in Subprime-Mortgage Backed Securities
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...[Show more]
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|Source:||Open Economies Review|
|01_Dungey_Systematic_and_Liquidity_Risk_2013.pdf||2.21 MB||Adobe PDF||Request a copy|
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