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An empirical analysis of structuring commercial mortgage-backed securities : Australian evidence

Chikolwa, Bwembya (2007) An empirical analysis of structuring commercial mortgage-backed securities : Australian evidence. In 13th Pacific-Rim Real Estate Society Conference, 21-24 January 2007, Fremantle, WA.

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Abstract

The ultimate goal of structuring Commercial Mortgage-Backed Securities (CMBS) transactions is to obtain a high credit rating as this has an impact on the yield obtainable and the success of the issue. Though bond rating agencies claim that their ratings reflect each agency’s opinion about an issue’s potential default risk and rely heavily on a committee’s analysis of the issuer’s ability and willingness to repay its debt and therefore researchers would not be able to replicate their ratings quantitatively (Kim 2005), we follow previous researchers who gone ahead and replicated bond ratings on the premise that the financial variables extracted from public financial statements, such as financial ratios, contain a large amount of information about a company’s credit risk (Huang et al. 2004). We use artificial neural networks (ANN) and ordinal regression (OR) as alternative methods to predict CMBS ratings. OR results show that rating agencies use only a subset of variables they describe or indicate as important to CMBS rating as some of the variables they use were statistically insignificant. Overall, ANN show superior results to OR in predicting CMBS ratings.

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ID Code: 21059
Item Type: Conference Paper
Additional Information: See author's download statistics at Author link below
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Keywords: Commercial Mortgage-Backed Securities, credit rating, ordinal regression, artificial neural networks
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BANKING FINANCE AND INVESTMENT (150200) > Finance (150201)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BANKING FINANCE AND INVESTMENT (150200) > Financial Econometrics (150202)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > COMMERCIAL SERVICES (150400) > Real Estate and Valuation Services (150403)
Divisions: Past > QUT Faculties & Divisions > Faculty of Built Environment and Engineering
Past > Schools > School of Urban Development
Copyright Owner: Copyright 2007 [please consult the author]
Deposited On: 10 Jun 2009 11:12
Last Modified: 09 Jun 2010 23:43

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