We evaluate the effects of CDO issuance on the pricing of subprime mortgage-backed securities. Upon controlling for mortgage option values and other well-established determinants of credit spreads, GMM results indicate that the emergence and rapid capitalization of the subprime-backed CDO market...

Secondary markets for credit are widely believed to improve efficiency and increase access to credit. In part, this is because of their greater ability to manage risk. However, the degree to which secondary markets expand access to credit is virtually unknown. Using the mortgage market as an...