Design of Financial Securities: Empirical Evidence from Private-Label RMBS Deals

• 成果类型: Article
• 署名作者: Begley, Taylor A.; Purnanandam, Amiyatosh
• 署名单位: Washington University (WUSTL); Washington University (WUSTL); University of Michigan System; University of Michigan
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhw056
• 发表日期: 2017
• 页码: 120
• 关键词: mortgage-backed securities; CRISIS; liquidity; default; credit; MODEL; intermediation; INVESTMENT; ratings; IMPACT

摘要

We study the key drivers of security design in the residential mortgage-backed security (RMBS) market during the run-up to the subprime mortgage crisis. We show that deals with a higher level of equity tranche have a significantly lower delinquency rate conditional on observable loan characteristics. The effect is concentrated within pools with a higher likelihood of asymmetric information between deal sponsors and potential buyers of the securities. Further, securities sold from high-equity-tranche deals command higher prices conditional on their credit ratings. Overall, our results show that the goal of security design in this market was not only to exploit regulatory arbitrage, but also to mitigate information frictions that were pervasive in this market.