This paper uses the market-standard Gaussian copula model to show that fair spreads on CDO tranches are much higher than fair spreads on similarly-rated corporate bonds. It implies that credit ratings are not sufficient for pricing, which is surprising given their central role in structured...

In this paper, we empirically investigate two economic issues (1) the factors that affect the primary market spread on non-U.S. asset-backed securities and (2) whether investors rely solely on credit ratings and ignore other credit-related factors. We do so by using a panel-data fixed-effects...

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...

The growth of securitisation has added a new class of securities to the financial markets. Rating these securities involves evaluating complex risks which are not inherent in conventional market instruments like bonds. This article decomposes the collateral and structural risks involved in...

We compare the structure and performance of private (non-GSE) mortgage-backed securities sold by large issuers vs. those sold by small issuers over the period 2000-2006. Securities sold by large issuers have less subordination — a greater fraction of the deal receiving AAA rating — than...

This paper is premised on the theory that the current financial crisis resulted in large part from deterioration of mortgage-backed securities. It concludes that credit rating agencies were the primary reason for this deterioration.In reaching that conclusion, this paper first explains the...

One of the roots of the 2008 financial crisis was a deterioration of rating agency standards, which contributed to the widespread defaults in the residential mortgage-backed securities (RMBS) sector. In this paper we suggest a change to the rating agency selection process that removes much of...