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dc.contributor.authorKrahnen, Jan Pieteren_US
dc.contributor.authorWilde, Christianen_US
dc.date.accessioned2008-11-31en_US
dc.date.accessioned2010-07-15T12:57:26Z-
dc.date.available2010-07-15T12:57:26Z-
dc.date.issued2008en_US
dc.identifier.urihttp://hdl.handle.net/10419/36645-
dc.description.abstractModern bank management comprises both classical lending business and transfer of asset risk to capital markets through securitization. Sound knowledge of the risks involved in securitization transactions is a prerequisite for solid risk management. This paper aims to resolve a part of the opaqueness surrounding credit-risk allocation to tranches that represent claims of different seniority on a reference portfolio. In particular, this paper analyzes the allocation of credit risk to different tranches of a CDO transaction when the underlying asset returns are driven by a common macro factor and an idiosyncratic component. Junior and senior tranches are found to be nearly orthogonal, motivating a search for the where about of systematic risk in CDO transactions. We propose a metric for capturing the allocation of systematic risk to tranches. First, in contrast to a widely-held claim, we show that (extreme) tail risk in standard CDO transactions is held by all tranches. While junior tranches take on all types of systematic risk, senior tranches take on almost no non-tail risk. This is in stark contrast to an untranched bond portfolio of the same rating quality, which on average suffers substantial losses for all realizations of the macro factor. Second, given tranching, a shock to the risk of the underlying asset portfolio (e.g. a rise in asset correlation or in mean portfolio loss) has the strongest impact, in relative terms, on the exposure of senior tranche CDO-investors. Our findings can be used to explain major stylized facts observed in credit markets.en_US
dc.language.isoengen_US
dc.publisherUniv., Fachbereich Wirtschaftswiss. Frankfurt am Mainen_US
dc.relation.ispartofseriesWorking paper series // Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften Finance & accounting 187en_US
dc.subject.jelG21en_US
dc.subject.jelG28en_US
dc.subject.ddc330en_US
dc.subject.keywordcredit risken_US
dc.subject.keywordrisk transferen_US
dc.subject.keywordsystematic risken_US
dc.subject.stwKreditsicherungen_US
dc.subject.stwSecuritizationen_US
dc.subject.stwRisikoen_US
dc.subject.stwAllokationen_US
dc.subject.stwBankrisikoen_US
dc.subject.stwSchocken_US
dc.subject.stwKreditmarkten_US
dc.subject.stwTheorieen_US
dc.titleRisk transfer with CDOsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn584110030en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
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