Determinants of Asset-Backed Security Prices in Crisis Periods

by William Perraudin of Imperial College and Risk Control Limited, and
Shi Wu of Imperial College and Risk Control Limited

December 2008

Abstract: This paper investigates factors that contribute to the cross-sectional pattern of spreads in Asset-Backed Security (ABS) prices in times of crisis. The periods include the crisis in the Manufactured Housing sector in 2004 and the turmoil in mortgage backed ABS in 2007. The cross section of prices for a given rating category appear to be poorly explained by liquidity and risk and there is evidence of a collapse in market confidence in the ratings agency classifications.

Keywords: Asset-Backed Security, Manufactured Housing sector, rating.

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