Explaining Launch Spreads on Structured Bonds

Maciej Firla-Cuchra

No 230, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: We investigate determinants of launch spreads in European securitization transactions over the last decade. First, we develop a simple, reduced-form pricing model for all issues across different transaction types and test it. We document the critical importance of credit ratings without refinements as the key pricing factors for structured finance securities at launch. Next, we show that other price determinants, such as placement characteristics, are consistently significant in their impact on spreads and delineate the opposing effects of liquidity and market segmentation. Finally, we show that other factors that might directly affect investors` payoffs, such as creditors` rights, exhibit consistent relationships to launch spreads beyond the credit rating. Hence, we conjecture that credit rating agencies systematically differ from investors in their assessment of certain issues` and markets` characteristics.

Keywords: Securitisations; Credit Ratings; Structured Finance; Bond Markets; Asset Pricing; Liquidity (search for similar items in EconPapers)
JEL-codes: G14 G15 G32 (search for similar items in EconPapers)
Date: 2005-03-01
New Economics Papers: this item is included in nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
https://ora.ox.ac.uk/objects/uuid:7bc29980-649e-4b43-b6b8-d65e6f8e4d5b (text/html)

Related works:
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:oxf:wpaper:230

Access Statistics for this paper

More papers in Economics Series Working Papers from University of Oxford, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Anne Pouliquen ( this e-mail address is bad, please contact ).