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Regime changes in sub-prime margins under the US housing bubble

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Sarmiento, Camilo
Abstract (Spanish)
La fijación de precios basada en el riesgo es una alineación de la fijación del precio del riesgo crediticio con el riesgo crediticio esperado: cobrar una tasa de interés más alta por un riesgo más alto (Yezer, 2002). Este artículo muestra una relajación sistemática de la valoración del riesgo para los préstamos de alto riesgo durante la burbuja inmobiliaria de EE. UU., un período que se extendió de 2001 a 2006. Por ejemplo, se ha demostrado que un préstamo idéntico, pero con diferentes vencimientos, tiene primas significativamente más bajas en 2005 que en 2003. Sorprendentemente, para un riesgo crediticio determinado, los resultados de las estimaciones muestran una reducción de la prima de 60 puntos básicos en las originaciones de alto riesgo entre 2003 y 2005.
Abstract (English)
Risk-based pricing is an alignment of loan risk pricing with expected loan risk – charging a higher interest rate for higher risk (Yezer, 2002). This article shows systematic relaxation of risk pricing for sub-prime loans during the US housing bubble, a period that extended from 2001 to 2006. For example, an identical loan, but having different vintages is shown to have significantly lower premiums in 2005 than in 2003. Strikingly, for a given credit risk, estimation results show a premium reduction of 60 basis points in sub-prime originations from 2003 to 2005.
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9 páginas
URI: https://repositorio.escuelaing.edu.co/handle/001/2759
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AG - Centro de Estudios Económicos
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