An Empirical Analysis of Asset-Backed Securitization

60 Pages Posted: 14 Sep 2007 Last revised: 22 Mar 2010

See all articles by Dennis Vink

Dennis Vink

Nyenrode Business University

André E. Thibeault

Vlerick Business School

Date Written: September 9, 2008

Abstract

In this study we provide empirical evidence demonstrating a relationship between the nature of the assets and the primary market spread. The model also provides predictions on how other pricing characteristics affect spread, since little is known about how and why spreads of asset-backed securities are influenced by loan tranche characteristics. We find that default and recovery risk characteristics represent the most important group in explaining loan spread variability. Within this group, the credit rating dummies are the most important variables to determine loan spread at issue. Nonetheless, credit rating is not a sufficient statistic for the determination of spreads. We find that the nature of the assets has a substantial impact on the spread across all samples, indicating that primary market spread with backing assets that cannot easily be replaced is significantly higher relative to issues with assets that can easily be obtained. Of the remaining characteristics, only marketability explains a significant portion of the spreads' variability. In addition, variations of the specifications were estimated in order to asses the robustness of the conclusions concerning the determinants of loan spreads.

Keywords: asset securitization, asset-backed securitisation, bank lending, default risk, risk management, leveraged financing

JEL Classification: G21, G24, G32

Suggested Citation

Vink, Dennis and Thibeault, André E., An Empirical Analysis of Asset-Backed Securitization (September 9, 2008). 21st Australasian Finance & Banking Conference 2008 Paper, Available at SSRN: https://ssrn.com/abstract=1014071 or http://dx.doi.org/10.2139/ssrn.1014071

Dennis Vink (Contact Author)

Nyenrode Business University ( email )

Straatweg 25
P.O. Box 130
Breukelen, 3620 AC
Netherlands

HOME PAGE: http://www.dennisvink.nl

André E. Thibeault

Vlerick Business School ( email )

Library
REEP 1
Gent, BE-9000
Belgium

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