Trustee Reputation in Securitization: When Does it Matter?

24 Pages Posted: 5 Apr 2019

See all articles by Solomon Deku

Solomon Deku

Nottingham Trent University - Nottingham Business School

Alper Kara

University of Huddersfield

David Marques-Ibanez

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2019

Abstract

We consider the role of trustees–who are nominated to protect the interests of investors–in securitization pricing and whether investors rely on them to mitigate risks. In particular, we examine the effect of trustee reputation on initial yield spreads of European mortgage‐backed security (MBS) issuances between 1999 and the first half of 2007. We find that engaging reputable trustees led to lower spreads during the credit boom period prior to the 2007–2009 financial crisis. Our findings suggest that trustees’ reputation was considered by investors to be more important when risk assessment became more challenging.

Keywords: 2007–2009 financial crisis, MBS, securitization, trustee reputation

JEL Classification: G21, G28

Suggested Citation

Deku, Solomon and Kara, Alper and Marques-Ibanez, David, Trustee Reputation in Securitization: When Does it Matter? (May 2019). Financial Markets, Institutions & Instruments, Vol. 28, Issue 2, pp. 61-84, 2019, Available at SSRN: https://ssrn.com/abstract=3367146 or http://dx.doi.org/10.1111/fmii.12106

Solomon Deku (Contact Author)

Nottingham Trent University - Nottingham Business School ( email )

Nottingham
United Kingdom

Alper Kara

University of Huddersfield ( email )

David Marques-Ibanez

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
49 6913 44 6460 (Phone)
49 6913 44 6460 (Fax)

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