20 Pages Posted: 22 Oct 2007
Date Written: June 2007
Toxic waste refers to the riskiest derivative structures arising from collateralized mortgage obligations (CMOs). We use simulations to predict how this risk would manifest itself in various interest rate environments. We also look for evidence on the total dollar value of these securities, who holds them, and how much they hold. Very limited public information is available, but commercial banks are required to report on their holdings, and we investigate the extent to which the risk is concentrated in that sector.
Suggested Citation: Suggested Citation
Haubrich, Joseph G. and Lucas, Deborah J., Who Holds the Toxic Waste? An Investigation of CMO Holdings (June 2007). FRB of Cleveland Policy Discussion Paper No. 20. Available at SSRN: https://ssrn.com/abstract=1023688 or http://dx.doi.org/10.2139/ssrn.1023688
By S. Passmore