Vivian van Breemen

47 (6), a drop of about 65% during the collapse of the structured finance markets i(n4 )t haen dp e(r6i )o do f2P0a0n8e–l 2B0. 1T1hci so ms upgagreesdt st ot ht ahte i pn r ceov ni ot ur as spt et roi ot hd e2E0 U0 ,4 c–r2e0d0i t7 r, ac toi lnugms ni ns the US market, even during the financial crisis, remained a large and consistent determinant of funding cost. Looking at credit rating alone in column (5) of Panels A and B, the R² reveals a significant higher explanatory power of the credit rating for the US market (R² of 0.55) compared to the EU market (R² of 0.13). Hence, consistent with the subset 2a l0o0n4e–c2o0m0p7a, irnevdetsot oErUs imn at hr keeUt Si nmveasrtkoertsr. eI nl i ef adctto, tahger e a t e r e x t e n t o n c r e d i t ra t i n g s R² of 0.13of the model for the EU market is considerably lower than the R² in the model for the previous two- year subsets with R²s of 0.614 in column (1) and 0.635 in column (3). Next, we study the security design factors and look at some differences between the two markets for the period 2008–2011. We see that the coefficient of Log Tranche Size becomes insignificant in the EU while it becomes highly significant with a coefficient of –29.77 (t-stat=5.43) in the US market. Thus, for the 2008- 2w0e1d1opneor itoodb, sl ae rrgvee rt Ch Le Os atmr aen ci nh et sh ee xEpUe rmi eanrckeedt . l Fo uwret hr ef ur mn doirneg, ac ol tshtoiungthh ei nUtSh. e, bUuSt market we generally see a consistently positive and highly significant coefficient for Capital Allocation across time, in the 2008-2011 period it has no significant impact on the funding cost. This is different in the EU market, where we see for the first time a highly significant coefficient for Capital Allocation of 64.95 (t-stat=3.15) with a negative sign. So, in this period, which was characterized bi nyv es sutbosrtsa nhtai da l amdai rf fkeerte nd ti sor up pi nt ii oo nn , oonu rh or ews uclat ps i st aulg ag lel sotc at ht iaotn i ni s tthoe btew toa kme anr ki nettos aaccccoouunntt iinn tthheeiprrcirceindgitorfatCiLnOgss., in addition to how CRAs had already taken it into Chapter 2 - How much do Investors Rely on Credit Ratings

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