35 between the partition points. The average rating notch length is calculated as (µ20 - µ1m o) /d1e9l .dDe ifvi ni de idn gi nt hE eq uy ea at iro innsd(i 2c a. 2t o) r- c( o2 e. 4f f)i, cbi ey nt thse, craaltci un lga nt eodt cuhs il ne gn gt ht he, owr ed ec rree da tleo ga int icnr de di ciat tsoprr feoardrsa, twi negusstea nt hdiasridnsd. iIcna toorrd ienr mt ootdees lt 1t h, ew ihme rpea c t o f r a t i n g s t a n d a r d s o n Rating Standards denote the year indicator coefficients divided by the rating notch length in year t. 2.3.2 Variable Construction and Summary Statistics 2.3.2.1 Dependent variable The dependent variable of our study is the specific funding cost of CLO tranches. Wwhei cmheeaqsuuaretetshtios tbhye tqhueopterdi mmaarrygiisnsfuoarntchee st prarne ac hde, s(i m p ly re fe r re d to a s s p re a d , Spread). For a given tranche, tt hh ee fruenf edri en ng cceo sr ta ft oe r rtehper iessseunetrs i st ht eh eproerf tei roenn co ef rt ah tee fpul nu ds itnhge cqousot t et hd amt ai sr gai nm, wa rhkeerte- wide benchmark and the quoted margin equates to the portion of the funding cost that is tranche-specific. This latter tranche-specific portion of the funding cboy s pt ui sr cthhaes iandgd ti thi ao tn apla rptei cr ual na rn ut rma nccohme , pwe nh si caht i omne faonrs t thhea tr itshke f qa cueodt ebdy mi navr eg si nt o irss, fCoLrOoturra npcuhrep. oI sne os ,u trhset uadpyp, rwo pe rui as tee omn leyafsluo raet i no gf -trhaet estpreacnicf ihce fsuins ds ui negd caot spt aor f t ht haet wE Ue rCeLbOe tnrcahnmc haer sk ei nd oouf fr tsht ue dEyuar no pd eUa Sn di no tl learrb La on nk doof nf e irne tde rrba at en k( EoUf fRe IrBe dO Rr a) t feo (rUtShDe LIBOR) for the US CLO tranches in our study.15 For securities issued at par, the Spread at issue – the dependent variable in model (1) – equals the quoted margin 15u nEsUe cRuI Br eOdRbraesf il se. cUt sS tDh eL Ii Bn tOeRr erset f rl ea ct et sa tt hwe hi ni cthe rhei sgth rl ya tcer ea dt iwt rhai tcehdhbi ga hn lkys ccraend bi torrartoewd , bi na ne ku sr ocsa, nf rbo omr root wh e, ri nb Ua nS kdsool lna ra sn, fbraosmis ofothr earvbaarinektsy oonf manatuunristeiecsu.red basis. EURIBOR and USD LIBOR are determined and communicated on a daily Chapter 2 - How much do Investors Rely on Credit Ratings
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