Details
| Translated title of the contribution | Ein analytischer Ansatz für die systematische Risikosensitivität von strukturierten Finanzprodukten |
|---|---|
| Original language | English |
| Pages (from-to) | 1 - 37 |
| Number of pages | 17 |
| Journal | Review of Derivatives Research |
| Volume | 2013 |
| Issue number | 17 |
| Publication status | Published - 26 Apr 2013 |
Abstract
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In: Review of Derivatives Research, Vol. 2013, No. 17, 26.04.2013, p. 1 - 37.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - An analytical approach for systematic risk sensitivity of structured finance products
AU - Claußen, Arndt
AU - Schmelzle, Martin
AU - Rösch, Daniel
PY - 2013/4/26
Y1 - 2013/4/26
N2 - The global financial crisis has shown that many financial institutions dealing with credit derivatives were exposed to severe unexpected losses. This indicates that systematic influences are decisively underestimated particularly with regard to structured products like securitized tranches of collateralized debt obligations. Our analytical study addresses these systematic effects: We provide a simple model which allows a closed-form comparison of both bonds and tranches with respect to their systematic risk. We demonstrate that the exposure to systematic risk of tranches may be many times higher than the exposure of bonds, even if both products share the same rating grade, e.g., an ‘AAA’ rating, measured by either default probability or expected loss. Particularly in economic downturns, default rates of tranches may be multiples of those of bonds. Our results help understand high default rates of tranches during the financial crisis and show that classical ratings are insufficient metrics for measuring risks of structured products.
AB - The global financial crisis has shown that many financial institutions dealing with credit derivatives were exposed to severe unexpected losses. This indicates that systematic influences are decisively underestimated particularly with regard to structured products like securitized tranches of collateralized debt obligations. Our analytical study addresses these systematic effects: We provide a simple model which allows a closed-form comparison of both bonds and tranches with respect to their systematic risk. We demonstrate that the exposure to systematic risk of tranches may be many times higher than the exposure of bonds, even if both products share the same rating grade, e.g., an ‘AAA’ rating, measured by either default probability or expected loss. Particularly in economic downturns, default rates of tranches may be multiples of those of bonds. Our results help understand high default rates of tranches during the financial crisis and show that classical ratings are insufficient metrics for measuring risks of structured products.
KW - Theorie
KW - Derivat
U2 - https://doi.org/10.1007/s11147-013-9089-1
DO - https://doi.org/10.1007/s11147-013-9089-1
M3 - Article
VL - 2013
SP - 1
EP - 37
JO - Review of Derivatives Research
JF - Review of Derivatives Research
SN - 1380-6645
IS - 17
ER -