71 global financial crisis from 2005 to 2007 showed systematic rating inflation due tsoecaurdieticelisn(eAisnhcrraatifnt getsatal.n, 2d0a1rd1s).applied by CRAs to subprime mortgage-backed In this chapter, we analyze the complete universe, as reported in Bloomberg, of 8m, 9o 3n 1t hCaLf Ot e rt rwa nh ci chhe tshoerEi gUi nraetgeudl aatni odnssorledg farrodmi n gN do vu ea ml cbr ee dr i1t 9r a9t6i ntgos Mf oarys t2r0u1c 3t u, rt eh de po fr ot hd eu cstesccuarmi t ey idnet os ifgonr coef. WC LeOosb tt oa i ne xi na mf o irnme awt i ho ne tohne rt hdeecaol mc opml epx il et yx icthyamr aacttteerri ss tfioc sr tdhoemni nu amt ebde rb oy fMr ao toi dn yg ’ss da insdc l So&s ePdaantdt wh ee mn ootme et hnat t o6f 2i .s7s%u aonfc ae l. l TChLeO Ct Lr aOn cmhaerskwe ti tihs aO fr at ht ien dg uf raol mr a teei dt hCeLr OMs o, 9o6d.y3’ %s orreSc &e iPv eadl seoqruei cveailveendt raapt iunbglsi cf rroamt i nMg of roodmy ’ st haen do tSh&e Pr. (i.e., 3.7% had split ratings). Consistent with the rating catering theory, in our first set of tests we find that prior to the Great Recession, CLOs with complexity characteristics were more likely to have dual credit ratings than a single credit rating; hence complex CLO deals are less likely to have been subject to rating shopping. In post-crisis years, hr aotwi negv ei rn, swt eea dd ooffi ntdwtoh, aat cfoi nmdpi nl egx tChLaOt ss uwgegrees mt s oar eglri ke ea ltye rt ol ihkaevl ieh ooonde doifs crlaotsi ne dg sphr eo fpepr ei nngc. eI nt oo du irs sc el oc soen od nsee tCoRf At eosvt se ,r wt he ee ox at hmeirnwe hwehne dt heearl i ins gs uwe irtsh hcaodmappl ea xr it ti yc .uWl a er froaut hnedr tthhaatnf oa nr cSo&mP prlaetxi nCgLiOnst, hi es spuoesrts- ct reinsdi sepdetroi oddi .s c l o s e a M o o d y ’ s c r e d i t r a t i n g Wo f hi si sl eu we res st ho orwe pionrtthoensee ot wr tows oe tcsroe fdti et srtast itnhgast coonmt hpel ei rx Ci tLy Oms a, ttht eer qe du ei ns tti ho ne dr eemc i saiionns wt hheect ahseer oi nf vdeusat ol rrsa t ewde rt er a anwc haerse aonf dt ht hee cerxetdeint t rtaot i wn gh ircihs kt hoefy rvaat ri ni egd ctahteeirri nygi e il nd Chapter 3 - Security Design and Credit Rating Risk
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