Where Did the Risk Go? How Misapplied Bond Ratings Cause Mortgage Backed Securities and Collateralized Debt Obligation Market Disruptions

By Joseph R. Mason, Joshua Rosner. 2007

138 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/1717cc9f448e2b57402b1f7ebda57895449eb8c6

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

Rating the raters: Are reputation concerns powerful enough to discipline rating agencies?☆☆☆ (2009, background): “For example the title of the article by Mason and Rosner (2007) is self explanatory: How misapplied bond ratings cause mortgage backed securities and C.D.O. market disruptions .”
Understanding the Securitization of Subprime Mortgage Credit (2008, unknown): “as in Belgium or Singapore, regardless whether that instrument is a standard corporate bond or a structured product such as a tranche on a collateralized debt obligation (CDO); see also Mason and Rosner (2007). The actual behavior of rated obligors or instruments may turn out to have more heterogene”
Ratings Shopping and Asset Complexity: A Theory of Ratings Inflation (2009, unknown): “Mason and Rosner (2007) document that com- plex CDOs have significantly higher default rates than simple corporate bonds with identical ratings.4 Similarly, it was mortgage-backed securities whose underlying credit risk, correlation risk and pre-payment risk are notoriously difficult to assess,…”
Do Rating Agencies Cater? Evidence from Rating-Based Contracts (2015, unknown): “2012) and in particular for structured finance products (Mason and Rosner 2007; Benmelech and Dlugosz 2009).”
Credit Ratings Failures and Policy Options (2010, unknown): “As noted by Mason and Rosner (2007), it is surprising that these data would not have been collected by Moody’s earlier, considering that ‘traditionally the loan to value ratio (LTV), FICO score and the borrowers’ DTI are the three most significant measures of credit risk on a mortgage’ (p. 24).”
Rating Agency Adjustments to GAAP Financial Statements and Their Effect on Ratings and Credit Spreads (2015, background): “Greater leverage is associated with greater risk (Merton (1974)).”
The 2007 Meltdown in Structured Securitization: Searching for Lessons not Scapegoats (2008, background): “With financial intermediaries either strictly required to hold only highly rated instruments or allowed to hold less capital against highly rated securities, ratings understandably grew in demand, as did the pressure for “rating inflation.””