The alchemy of CDO credit ratings

Efraim Benmelech, Jennifer Dlugosz

Research output: Contribution to journalArticle

85 Citations (Scopus)

Abstract

Collateralized loan obligations (CLOs) were one of the largest and fastest growing segments of the structured finance market, fueling the 2003-2007 boom in syndicated loans and leveraged buyouts. The credit crisis brought CLO issuance to a halt, and as a result the leveraged loan market dried up. Similar to other structured finance products, investors in CLOs rely heavily on credit rating provided by the rating agencies, yet little is known about CLO rating practices. This paper attempts to fill the gap. Using novel hand-collected data on 3912 tranches of collateralized loan obligations we document the rating practices of CLOs and analyze their structures.

Original languageEnglish (US)
Pages (from-to)617-634
Number of pages18
JournalJournal of Monetary Economics
Volume56
Issue number5
DOIs
StatePublished - Jul 1 2009

Fingerprint

Loans
CDOs
Credit rating
Obligation
Finance
Rating
Investors
Syndicated loans
Rating agencies
Leveraged buyouts
Credit crisis

Keywords

  • Collateralized loan obligations
  • Credit rating
  • Leveraged buyouts securitization

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Benmelech, Efraim ; Dlugosz, Jennifer. / The alchemy of CDO credit ratings. In: Journal of Monetary Economics. 2009 ; Vol. 56, No. 5. pp. 617-634.
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The alchemy of CDO credit ratings. / Benmelech, Efraim; Dlugosz, Jennifer.

In: Journal of Monetary Economics, Vol. 56, No. 5, 01.07.2009, p. 617-634.

Research output: Contribution to journalArticle

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