Estimating Default Probabilities Implicit in Commercial Mortgage Backed Securities (CMBS)

Estimating Default Probabilities Implicit in Commercial Mortgage Backed Securities (CMBS) This paper uses a structural credit risk model, providing an analytical formula to estimate default probabilities implicit in commercial mortgage backed security prices. Empirical studies of CMBS default have focused on the probability of default depending on loan characteristics at the origination and market indices. Recent studies show that unobservable current loan-to-value (LTV) ratio is a key state variable driving default. We update this variable using Real Estate Investment Trust (REIT) property-type indices over time. Later, we employ first passage time approach to study CMBS default using implied LTV. The Journal of Real Estate Finance and Economics Springer Journals

Estimating Default Probabilities Implicit in Commercial Mortgage Backed Securities (CMBS)

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Springer US
Copyright © 2008 by Springer Science+Business Media, LLC
Economics; Regional/Spatial Science; Financial Services
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