J. Zhang
Asset Securitizations and Credit Default Swaps
Zhang, J.
Authors
Abstract
This study examines the effects of off-balance sheet versus on-balance sheet securitizations on the originator's credit risk in the default swap (CDS) market across the recent business cycle from 2002 to 2009. I find that on-balance sheet securitizations demonstrate greater effects on the originator's CDS premium than off-balance sheet securitizations in the business cycle. While off-balance sheet securitizations’ effects on the originator's CDS premium become significantly stronger after 2007 when the economy declines, on-balance sheet securitizations’ effects on the originator's CDS premium do not experience a significant change with the onset of the recession. The results suggest that the CDS market views originators as having greater probabilities not to honour their implicit guarantees for off-balance sheet securitizations during the economic downturn. The results also indicate that on balance sheet and off-balance sheet securitizations have distinctly different risk properties. It would be beneficial to investors if regulations take into considerations the changing credit risks of off-balance sheet securitizations and the different structures of asset securitizations.
Citation
Zhang, J. (2014). Asset Securitizations and Credit Default Swaps. Financial Markets, Institutions and Instruments, 23(4), 211-243. https://doi.org/10.1111/fmii.12019
Journal Article Type | Article |
---|---|
Publication Date | Nov 1, 2014 |
Deposit Date | Oct 26, 2015 |
Publicly Available Date | Mar 29, 2024 |
Journal | Financial Markets, Institutions and Instruments |
Print ISSN | 0963-8008 |
Electronic ISSN | 1468-0416 |
Publisher | Wiley |
Peer Reviewed | Peer Reviewed |
Volume | 23 |
Issue | 4 |
Pages | 211-243 |
DOI | https://doi.org/10.1111/fmii.12019 |
Public URL | https://durham-repository.worktribe.com/output/1428070 |
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Copyright Statement
This is the accepted version of the following article: Zhang, J. Z. (2014), Asset Securitizations and Credit Default Swaps. Financial Markets, Institutions and Instruments, 23(4): 211-243, which has been published in final form at http://dx.doi.org/10.1111/fmii.12019. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
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