Munich Personal RePEc Archive

The Performance of UK Securitized Subprime Mortgage Debt: ‘Idiosyncratic’ Behaviour or Mortgage Design?

Lanot, Gauthier and Leece, David (2010): The Performance of UK Securitized Subprime Mortgage Debt: ‘Idiosyncratic’ Behaviour or Mortgage Design?

[img]
Preview
PDF
MPRA_paper_27137.pdf

Download (584kB) | Preview

Abstract

The research estimates a competing risk model of mortgage terminations on a sample of UK securitized subprime mortgages. We consider whether the variety of mortgage contracts that were securitized explains the performance of subprime securities and their supposed ‘idiosyncratic’ behaviour. The methodological advance is the use of a general, flexible modelling of unobserved heterogeneity over several dimensions, controlling for both selection issues involving mortgage choice and dynamic selection over time. We conclude that securities consisting of subprime loans can be given meaningful valuations on bank balance sheets if the performance of the different types of loans can be better understood. JEL Codes: G21 C13 C25 C51 D10 D14 E44

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.