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typora-copy-images-to: Risk Management and Financial Institution

Risk Management and Financial Institutions Chapter 6 —— The Credit Crisis of 2007-2008

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• A further important way of transferring risk is securitization
• CDO & ABS

6.1 The U.S. Housing Market 美国住房市场

• 2000年开始，房屋价格开始升值

• 2002 到 2005的低利率是一个重要的因素

• 2000到2006，次级抵押贷款激增

• Subprime mortgages are mortgages that are considered to be significantly more risky than average

6.1.1 Relaxation of Lending Standards

• for profits , relaxation the standards
• ARM adjustable rate morgages ----- teaser rate
• terms to describe mortgage lending:
  • liar loans —— lie on the application form
  • “NINJA” (no income, no job, no assets)

6.1.2 The Bubble Bursts

• 2006年下半年，house price edge down,原因有：

  • price increased, damand declined
  • teaser rate periored over led to foreclosures

• 银行的回收率降低，从75% 到 25%

6.2 Securitization 证券化

• 定义：The originators of mortgages did not in many cases keep the mortgages themselves. They sold portfolios of mortgages to companies that created products for investors from them. This process is known as securitization

• The most important thing for the lender was whether the mortgage could be sold to others

• depended primarily on the loan‐to‐value ratio and the applicant’s FICO score，主要取决于贷款与价值比率，以及申请者的FICO数据

• 评估者抬高估价，因为银行需要一个高的loan to value ratio

• 潜在借贷者会被建议采取措施提到自身的FICO

6.2.1 ABS

• 定义：An asset‐backed security (ABS) is a security created from the cash flows of financial assets such as loans, bonds, credit card receivables, mortgages, auto loans, and aircraft leases 资产支持证券

• Cash flows are allocated to tranches by specifying what is known as a waterfall

• The ABS is designed so that the senior tranche is rated AAA. The mezzanine tranche is typically rated BBB

• The objective of the creator of the ABS is to make the senior tranche as big as possible without losing its AAA credit rating

• CDO是ABS的一种，只不过底层资产是固收证券

6.2.2 ABS CDOs

• Equity 要么自留，要么销售给hedge fund，反而是mezzanine比较困难
• 因此对ABS 的 mezzanine 再创建一个ABS

• 当时更为普遍的构造：

• The risks in the AAA‐rated tranches of ABSs and ABS CDOs were higher than either investors or rating agencies realized

  • 相关性，correlations always increase in stressed market conditions
  • analysts was to assume that the BBB‐rated tranches of an ABS were equivalent in risk to BBB‐rated bonds，BBB ABS 在风险上不同于BBB bond

• ABS CDO存在cliff risk 悬崖风险

6.3 The Losses 损失

• Consequences：
  • lost money for investor
  • lost for those promising the quility of the mortgages
  • flight to quality,Credit spreads increased sharply
  • regulation

6.4 What Went Wrong?

• house price decrease widespread

• bank risk transfered

• rating structure products is new to rating agency

• inaccurate or incomplete information about the quality of the underlying assets

6.4.1 Regulatory Arbitrage 监管套利

• The regulatory capital banks were required to keep for the tranches created from a portfolio of mortgages was less than the regulatory capital that would be required for the mortgages themselves 监管资本的节约
• banking book and trading book

6.4.2 Incentives

• 在证券化的过程当中充斥着 agency costs
• Employee compensation falls into three categories：
  • regular salary
  • end‐of‐year bonus
  • stock or stock options

6.5 Lessons from the Crisis

• 风险管理人员应当注意那些非理性繁荣的机构，美好时光不会永久持续
• 相关性在压力市场情形下必定上升
• 违约率上升必然导致回收率的降低
• 交易人员的激励措施应当与公司利益相一致
• 如果一个交易看上去好的过分，那多半有评级机构没有考虑到的风险
• 投资者不可过度依赖评级机构，应该清楚假设，并自行分析
• 金融市场的透明性非常重要，否则会损失流动性
• 再证券化是一个糟糕的主意，证券化第一层的资产也必须进行分散化