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Publications
  • 2014
  • Working Paper

The Rise and Fall of Demand for Securitizations

By: Sergey Chernenko, Samuel G. Hanson and Adi Sunderam
  • Format:Print
  • | Language:English
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Abstract

Collateralized debt obligations (CDOs) and private-label mortgage-backed securities (MBS) backed by nonprime loans played a central role in the recent financial crisis. Little is known, however, about the underlying forces that drove investor demand for these securitizations. Using micro-data on insurers' and mutual funds' bond holdings, we find considerable heterogeneity in investor demand for securitizations in the pre-crisis period. We argue that both investor beliefs and incentives help to explain this variation in demand. By contrast, our data paints a more uniform picture of investor behavior in the crisis. Consistent with theories of optimal liquidation, investors largely traded in more liquid securities, such as government-guaranteed MBS, to meet their liquidity needs during the crisis.

Keywords

Debt Securities; Financial Markets; Financial Crisis

Citation

Chernenko, Sergey, Samuel G. Hanson, and Adi Sunderam. "The Rise and Fall of Demand for Securitizations." NBER Working Paper Series, No. 20777, December 2014.
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About The Authors

Samuel G. Hanson

Finance
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Adi Sunderam

Finance
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More from the Authors

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    Demand-and-Supply Imbalance Risk and Long-Term Swap Spreads

    By: Samuel G. Hanson, Aytek Malkhozov and Gyuri Venter
    • 2022
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    Shared Models in Networks, Organizations, and Groups

    By: Joshua Schwartzstein and Adi Sunderam
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    Segmented Arbitrage

    By: Emil Siriwardane, Adi Sunderam and Jonathan L. Wallen
More from the Authors
  • Demand-and-Supply Imbalance Risk and Long-Term Swap Spreads By: Samuel G. Hanson, Aytek Malkhozov and Gyuri Venter
  • Shared Models in Networks, Organizations, and Groups By: Joshua Schwartzstein and Adi Sunderam
  • Segmented Arbitrage By: Emil Siriwardane, Adi Sunderam and Jonathan L. Wallen
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