This paper provides evidence for regulatory arbitrage within the class of asset-backed securities (ABS) based on individual asset holding data of German banks. I find that banks operating with tight regulatory constraints exploit the low risk-sensitivity of rating-contingent capital requirements...

Banks increasingly recognize the need to measure and manage the credit risk of their loans on a portfolio basis. We address the subportfolio "middle market". Due to their specific lending policy for this market segment it is an important task for banks to systematically identify regional and...

The Securities and Exchange Commission (SEC) has asked whether credit rating agencies (CRA) committed fraud by misleading investors with respect to the default risk on mortgage backed securities (MBS). This paper argues that, to the detriment of investors, the CRA did not incorporate information...

This study examines the sources of credit risk associated with asset securitizations and whether credit rating agencies and the bond market differ in their assessment of this risk. Measuring credit risk using credit ratings, we find the securitizing firm's credit risk is positively related to...

We examine the discretionary activities that CLO managers engage in to pass monthly overcollateralization (OC) tests. These tests require a CLO's loan portfolio value, scaled by the CLO notes' principal balance, to be above a certain threshold. Using CLOs' granular disclosures, we develop...

This paper develops a formula to numerically estimate the unsubsidized, fair-market value of the toxic assets purchased with Federal Reserve loans. It finds that subsidy rates on these loans were on average 33.9 percent at origination. In contrast, by the 3rd quarter of the 2010, there was on...