EconPapers    
Economics at your fingertips  
 

Asymmetric information and the death of ABS CDOs

Daniel Beltran (), Larry Cordell and Charles Thomas ()

Journal of Banking & Finance, 2017, vol. 76, issue C, 1-14

Abstract: A key feature of the 2007 financial crisis is that for many securities trading had ceased; where trading did occur, market prices were well below intrinsic values, especially for ABS CDOs. One explanation is that information had been asymmetric, with sellers having better information than buyers. We first show the information advantages sellers had over buyers in both the issuance of CDOs and, through vertical integration, performance of the CDO collateral that could well have disrupted trading after the onset of the crisis. Using a “workhorse” model for pricing securities under asymmetric information and a novel dataset, we show how adverse selection could explain why the bulk of these securities either traded at significant discounts or did not trade at all.

Keywords: CDO; Securitization; Asymmetric; Lemons (search for similar items in EconPapers)
JEL-codes: C63 D43 D82 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426616302011
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Asymmetric Information and the Death of ABS CDOs (2013) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:76:y:2017:i:c:p:1-14

DOI: 10.1016/j.jbankfin.2016.11.008

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2023-01-23
Handle: RePEc:eee:jbfina:v:76:y:2017:i:c:p:1-14