The Opaqueness of structured bonds : evidence from U.S. insurance industry

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<title>The Opaqueness of structured bonds</title>
<subTitle>: evidence from U.S. insurance industry</subTitle>
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<namePart>Lemaire, Jean</namePart>
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<namePart>Xie, Xiaoying</namePart>
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<abstract displayLabel="Summary">It has been argued that the opaqueness of structured bonds, such as mortgage-backed securities, asset-backed securities and collateral debt obligations, was one of the major causes of the recent financial crisis that started in late 2007. We analyse the evolving nature of information asymmetry inherent in various types of structured bonds by examining the U.S. insurers¿ assets. We show that, prior to 2004, structured bonds were not associated with greater information asymmetry; however, holding more multi-class structured bonds, especially privately placed bonds, increased the information asymmetry when evaluating insurers¿ assets post-2004. The effect of information asymmetry was more significant with life insurers than with non-life insurers. In addition, by investigating the rating grades of such structured bonds, we find that the market views higher-grade, privately placed, multi-class structured bonds as having the highest information asymmetry among all types of structured bonds post 2004, an effect which is, again, more significant with life insurers. This result shows that structuring complexities and unreliable ratings make structured bonds more opaque than just securitisation itself.</abstract>
<note type="statement of responsibility">Sojung Carol Park, Jean Lemaire and Xiaoying Xie</note>
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<topic>Asimetría</topic>
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<subject xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="MAPA20080586294">
<topic>Mercado de seguros</topic>
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<topic>Demanda de seguros</topic>
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<topic>Crisis financiera</topic>
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<geographic>Estados Unidos</geographic>
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<title>Geneva papers on risk and insurance : issues and practice</title>
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<publisher>Geneva : The Geneva Association, 1976-</publisher>
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<identifier type="issn">1018-5895</identifier>
<identifier type="local">MAP20077100215</identifier>
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<text>03/10/2016 Volumen 41 Número 4 - octubre 2016 , p. 650-676</text>
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