Rating model arbitrage in CDO markets: An empirical analysis Morkotter, Stefan; Westerfeld, Simone

User activity

Share to:
View the summary of this work
Morkotter, Stefan ; Westerfeld, Simone
Appears In
International Review of Financial Analysis
Collateralized debt obligations
To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.irfa.2009.01.002 Byline: Stefan Morkotter, Simone Westerfeld Keywords: Rating model arbitrage; Collateralized Debt Obligations; Asymmetric information Abstract: We analyze whether information asymmetry between issuers and investors leads to rating model arbitrage in Collateralized Debt Obligation markets. Rating model arbitrage is defined as the issuer's deliberate capitalization of information asymmetry at the investor's cost on the basis of different rating processes. Using data from CDO transactions grouped by both rating agencies and underlying rating methodologies, we test for homogeneity of characteristic transaction features within the group and heterogeneity between the different groups. We find that the hypothesis stating non-existence of rating model arbitrage on the basis of information asymmetry does not hold as individual patterns of transaction characteristics within each group could be identified. Author Affiliation: Swiss Institute of Banking and Finance (s/bf), University of St. Gallen (HSG), Rosenbergstrasse 52, CH-9000 St. Gallen, Switzerland Article History: Received 13 October 2008; Revised 18 November 2008; Accepted 24 January 2009
Work ID

2 editions of this work

Find a specific edition
Thumbnail [View as table] [View as grid] Title, Author, Edition Date Language Format Libraries

User activity

e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this work

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this work

Add a comment

Show comments and reviews from Amazon users