Non-US Asset-backed Securities: Spread Determinants And Over-reliance On Credit Ratings
Source: Yale School of Management
In this paper, the authors empirically investigate two economic issues the factors that affect the primary market spread on non-U.S. asset-backed securities and whether investors rely solely on credit ratings and ignore other credit-related factors. They do so by using a panel-data fixed-effects model of primary market spreads for tranches of non-mortgage-related asset-backed securities issued over the period 1999-2006. With respect to the determinants of the primary market spread, they find that spread can be explained in terms of two factors credit rating and bond market conditions.