Investment Performance of Credit Risk Transfer Securities (CRTs): The Early Evidence

2018 ◽  
Author(s):  
Chao Gao ◽  
John J. McConnell
Keyword(s):  
Credit Risk ◽  
Investment Performance ◽  
Risk Transfer ◽  
Early Evidence ◽  
Credit Risk Transfer

Investment Performance of Credit Risk Transfer Securities (CRTs): The Early Evidence

2018 ◽  
Keyword(s):  
Credit Risk ◽  
High Yield ◽  
Mortgage Loans ◽  
Investment Performance ◽  
Risk Transfer ◽  
Residential Mortgage ◽  
Fannie Mae ◽  
Credit Risk Transfer ◽  
Freddie Mac ◽  
Tax Payers

Credit risk transfer (CRT) securities were introduced by Fannie Mae and Freddie Mac in 2013. As of the end of 2017, in combination, the two government sponsored housing enterprises had issued a total of $53 billion in CRTs linked to residential mortgage loans with a total face value of $1.79 trillion. The goal is to shift mortgage risk from tax payers to the private sector. In return, investors expect to be compensated. The authors document the returns earned by investors in the various CRT tranches since their inception. The most senior tranches have provided an average representative return of 0.26% per month. The most junior tranches have provided an average representative return of 1.71% per month. These compare with average monthly returns of 0.03%, 0.15%, and 0.87% to T-bills, 15-year agency mortgage-backed securities, and 10-year high-yield corporate bonds, respectively, over the same time periods.

Credit Risk Transfer and the Forecasting of Bank Defaults

2009 ◽  
Author(s):  
Giovanni Calice ◽  
Christos Ioannidis ◽  
Julian M. Williams
Keyword(s):  
Credit Risk ◽  
Risk Transfer ◽  
Credit Risk Transfer

What explains the recourse of US commercial banks to securitization?

2016 ◽  
Vol 15 (3) ◽  
pp. 317-328 ◽  
Author(s):  
Nesrine Bensalah ◽  
Hassouna Fedhila
Keyword(s):  
Credit Risk ◽  
Selection Procedure ◽  
Regulatory Capital ◽  
Heckman Selection Model ◽  
Mortgage Loans ◽  
Content Type ◽  
Risk Transfer ◽  
Credit Risk Transfer ◽  
The Usa ◽  
Heckman Selection

Purpose The purpose of this paper is to investigate the reasons that urge US banks to securitize. Design/methodology/approach The authors apply a logistic regression model to a sample of 5,394 observations. The dependent variable takes 1 if the bank securitizes and 0 if not. The authors use also, a Heckman selection model to account for the potential dependence between the decision to securitize and the decision of which assets to securitize. Findings The results indicate that liquidity, credit risk transfer, regulatory capital arbitrage and profitability are the most important factors that drive securitization in the USA. Moreover, the nature of the asset securitized appears to be dependent on the objective that the bank pursues. For funding and capital arbitrage objectives, the bank needs to securitize its mortgage loans. However, for credit risk transfer purposes, it has to opt for a non mortgage securitization. The nature of the asset securitized can thus, be used as a signal for bank’s intentions to securitize. Originality/value This study contributes to a better understanding of the reasons that urge banks to securitize. It also presents, using a Heckman selection procedure, a detailed analysis that discriminates between different types of securitization.

scholarly journals Credit risk transfer and bank competition

2010 ◽  
Vol 19 (3) ◽  
pp. 308-332 ◽  
Author(s):  
Hendrik Hakenes ◽  
Isabel Schnabel
Keyword(s):  
Credit Risk ◽  
Bank Competition ◽  
Risk Transfer ◽  
Credit Risk Transfer
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