Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 21, 2022 erstellt
Description:
Subprime securitizations were designed to produce safe AAA bonds by insulating them from the risks associated with the underlying mortgages. Yet, they became risky during the financial crisis of 2007-2009. We provide evidence that following the decline in the ABX indices which signaled emerging risks in the subprime market, AAA bond prices reflected bond specific information -- i.e. they became informationally sensitive. Furthermore, difficulties in assessing loss exposures amplified their sensitivity. Prior to the decline, they were informationally insensitive. These findings are consistent with information-based models of financial crises where negative shocks incentivize private information production altering the information sensitivity of safe securities