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Article: Did Subjectivity Play a Role in CDO Credit Ratings?

TitleDid Subjectivity Play a Role in CDO Credit Ratings?
Authors
Issue Date2012
Citation
Journal Of Finance, 2012, v. 67 n. 4, p. 1293-1328 How to Cite?
AbstractAnalyzing 916 collateralized debt obligations (CDOs), we find that a top credit rating agency frequently made positive adjustments beyond its main model that amounted to increasingly larger AAA tranche sizes. These adjustments are difficult to explain by likely determinants, but exhibit a clear pattern: CDOs with smaller model-implied AAA sizes receive larger adjustments. CDOs with larger adjustments experience more severe subsequent downgrading. Additionally, prior to April 2007, 91.2% of AAA-rated CDOs only comply with the credit rating agency's own AA default rate standard. Accounting for adjustments and the criterion deviation indicates that on average AAA tranches were structured to BBB support levels. © 2012 The American Finance Association.
Persistent Identifierhttp://hdl.handle.net/10722/139816
ISSN
2015 Impact Factor: 5.105
2015 SCImago Journal Rankings: 14.546
SSRN
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorGriffin, JMen_HK
dc.contributor.authorTang, DYen_HK
dc.date.accessioned2011-09-23T05:56:37Z-
dc.date.available2011-09-23T05:56:37Z-
dc.date.issued2012en_HK
dc.identifier.citationJournal Of Finance, 2012, v. 67 n. 4, p. 1293-1328en_HK
dc.identifier.issn0022-1082en_HK
dc.identifier.urihttp://hdl.handle.net/10722/139816-
dc.description.abstractAnalyzing 916 collateralized debt obligations (CDOs), we find that a top credit rating agency frequently made positive adjustments beyond its main model that amounted to increasingly larger AAA tranche sizes. These adjustments are difficult to explain by likely determinants, but exhibit a clear pattern: CDOs with smaller model-implied AAA sizes receive larger adjustments. CDOs with larger adjustments experience more severe subsequent downgrading. Additionally, prior to April 2007, 91.2% of AAA-rated CDOs only comply with the credit rating agency's own AA default rate standard. Accounting for adjustments and the criterion deviation indicates that on average AAA tranches were structured to BBB support levels. © 2012 The American Finance Association.en_HK
dc.languageengen_US
dc.relation.ispartofJournal of Financeen_HK
dc.titleDid Subjectivity Play a Role in CDO Credit Ratings?en_HK
dc.typeArticleen_HK
dc.identifier.emailTang, DY: yjtang@hku.hken_HK
dc.identifier.authorityTang, DY=rp01096en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1111/j.1540-6261.2012.01748.xen_HK
dc.identifier.scopuseid_2-s2.0-84864060441en_HK
dc.identifier.hkuros195854en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-84864060441&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume67en_HK
dc.identifier.issue4en_HK
dc.identifier.spage1293en_HK
dc.identifier.epage1328en_HK
dc.identifier.eissn1540-6261-
dc.identifier.isiWOS:000306734700004-
dc.publisher.placeUnited Statesen_HK
dc.identifier.ssrn1364933-
dc.identifier.scopusauthoridGriffin, JM=55436269300en_HK
dc.identifier.scopusauthoridTang, DY=13606932900en_HK

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