Search

You searched for: Content Type Working Paper Remove constraint Content Type: Working Paper Publishing Institution Board of Governors of the Federal Reserve System Remove constraint Publishing Institution: Board of Governors of the Federal Reserve System Publication Year within 10 Years Remove constraint Publication Year: within 10 Years Topic Financial Crisis Remove constraint Topic: Financial Crisis
Number of results to display per page

Search Results

  • Author: Daniel O. Beltran, Larry Cordell, Charles Thomas
  • Publication Date: 03-2013
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: A key feature of the 2007 financial crisis is that for some classes of securities trade has practically ceased. And where trade has occurred, it appears that market prices are well below their intrinsic values. This seems especially true for those securities where the payoff streams are particularly complex, for example, structured finance ABS CDOs. One explanation for this is that information about these securities' intrinsic values since the crisis has been asymmetric, with current holders having better information than potential buyers. We first characterize the information asymmetries that were present in the structured finance ABS CDO market. Because many of the CDO dealers had partially or fully integrated the pipeline from mortgage originations through CDO issuance, they had informational advantages over potential buyers that could well have disrupted trading in CDOs as the crisis took hold in August of 2007. Using a "workhorse" model for pricing securities under asymmetric information and a novel dataset for the intrinsic values of ABS CDOs, we show how the resulting adverse selection problem could explain why the bulk of these securities either trade at significant discounts to their intrinsic values or do not trade at all.
  • Topic: Security, Economics, Financial Crisis, Fiscal Policy
  • Political Geography: Global Focus
  • Author: Carlos Ó. Arteta, Mark Carey, Ricardo Correa, Jason Kotter
  • Publication Date: 04-2013
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: We empirically examine financial institutions' motivations to take systematic bad-tail risk in the form of sponsorship of credit-arbitrage asset-backed commercial paper vehicles. A run on debt issued by such vehicles played a key role in causing and propagating the liquidity crisis that began in the summer of 2007. We find evidence consistent with important roles for both owner-manager agency problems and government-induced distortions, especially government control or ownership of banks.
  • Topic: Economics, Financial Crisis, Risk, Banking, Commercialization
  • Political Geography: Global Focus
  • Author: Ozge Akinci
  • Publication Date: 08-2013
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: This paper uses a panel structural vector autoregressive (VAR) model to investigate the extent to which global financial conditions, i.e., a global risk-free interest rate and global financial risk, and country spreads contribute to macroeconomic fluctuations in emerging countries. The main findings are: (1) Global financial risk shocks explain about 20 percent of movements both in the country spread and in the aggregate activity in emerging economies. (2) The contribution of global risk-free interest rate shocks to macroeconomic fluctuations in emerging economies is negligible. Its role, which was emphasized in the literature, is taken up by global financial risk shocks. (3) Country spread shocks explain about 15 percent of the business cycles in emerging economies. (4) Interdependence between economic activity and the country spread is a key mechanism through which global financial shocks are transmitted to emerging economies.
  • Topic: Development, Emerging Markets, International Cooperation, Financial Crisis, Global Financial Crisis
  • Political Geography: Global Focus
  • Author: Carol C. Bertaut, Fang Cai, Nyssa Kim
  • Publication Date: 08-2013
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: This paper examines U.S. investors' portfolio investment patterns since the global financial crisis, particularly since the European debt crisis that began in late 2009. The global financial crisis during 2007-2009 was accompanied by an increase in U.S. investors' home bias. U.S. investors experienced significant valuation losses and pulled back notably from their foreign investment, especially from foreign debt. In contrast, while they have also incurred sizable losses on cross-border investment during the European debt crisis, U.S. investors so far have not shown any increase in home bias, and they have not even pulled back from their long-term investments in Europe. Holdings data show that U.S. investors have continued to invest in European securities, particularly in government debt, but have made little new investment in the financial sector. This continued interest in European securities could owe to the fact that most of U.S. holdings of European debt have been concentrated in dollar-denominated debt issued by core euro area countries and the United Kingdom, which are deemed relatively safe. Changes in the composition of holdings over the past couple years suggest that U.S. investors have behaved in a way that reflects their diversity and differing objectives: while investors reached for higher yields in government debt, there also appears to be some shift toward safer investment in the financial sector.
  • Topic: Debt, Financial Crisis, Investment, Securities, Stock Markets
  • Political Geography: Europe, North America, United States of America