Tranching and Rating
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چکیده
In this paper we analyze the source and level of the marketing gains when structured debt securities are sold at yields that reflect only their credit ratings, or specifically at the yield on an equivalently rated reference bond. We distinguish between credit ratings that are based on probabilities of default and ratings that are based on the expected default losses. We show that the marketing gain from subdividing a bond issued against given collateral into subordinated tranches can yield significant profits under the hypothesized pricing system. Increasing the systematic risk or reducing the idiosyncratic risk of the bond collateral increases the profits further. Given a fixed issue size the marketing gain is increasing in the number of tranches. JEL: G12, G13, G14, G21, G24.
منابع مشابه
Tranching and Rating
In this paper we analyse the source and magnitude of marketing gains from selling structured debt securities at yields that reflect only their credit ratings, or specifically at yields on equivalently rated corporate bonds. We distinguish between credit ratings that are based on probabilities of default and ratings that are based on expected default losses. We show that subdividing a bond issue...
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