Abstract

PENA-CEREZO, Miguel Á; RODRIGUEZ-CASTELLANOS, Arturo  and  IBANEZ-HERNANDEZ, Francisco J. Determinants Of The Primary Profitability Of Mortgage-Backed Securities: The Influence Of Multiframe Structures. Innovar [online]. 2014, vol.24, n.51, pp.127-142. ISSN 0121-5051.  https://doi.org/10.15446/innovar.v24n51.41538.

Abstract: This article analyzes the determinants of the primary profitability of mortgage-backed securities (MBS) issued in Spain between 1993 and 2011, a period during which the Spanish market became the most important in continental Europe. The results obtained from an analysis of the entire population of MBS issued (262 tranches from 94 securitization funds) indicates that their multiframe structuring helped reduce the perceived global risk associated with issuing these bonds by creating more complete markets. It also helped reduce the problems derived from the existence of information assymetries implicit in the selection of assets transferred by the issuing entity. This reduction in perceived risk had a direct effect on the profitability of the bonds issued. Furthermore, no evidence is found that the issue of MBS led to the transmission of risk. On the contrary, the credit agencies have on the whole retained the first loss tranches, contributing to maintaining MBS profitability levels at very low levels (beneath sovereign debt profitability). Indeed, the scant difference in profitability is due to the fact that the tranches that were retained did not offer return premiums that were adjusted to the inherent risk.

Keywords : Securitization; mortgage-backed securities; diferential; primary profitability; tranche; subordination; asymmetric information.

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