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August 18, 2014: IAQF Seminar

  • 18 Aug 2014
  • 5:45 PM (EDT)
  • NYU Kimmel Center, Room 914, 60 Washington Square South, New York, NY


Registration is closed

Does Skin‐in‐the‐Game Affect Security Performance? Evidence from the Conduit CMBS Market

A Talk by Adam B. Ashcraft

Does reducing the skin‐in‐the‐game of informed agents matter for the performance of securitized assets? In the conduit commercial mortgage backed securities (CMBS) market, an informed investor purchases the bottom five percent of the capital structure, known as the B‐piece, conducting independent screening of loans from which all other investors benefit. However, during the recent credit boom, a secondary market for B‐pieces developed, permitting these investors to significantly reduce their skin‐in‐the‐game. In this paper, we document, that after controlling for all information available at issue, the percentage of the B‐piece that is sold by these investors has a significant adverse impact on the probability that more senior tranches ultimately default. The result is robust to the use of an instrumental variables strategy which relies on the greater ability of larger B‐piece buyers to sell these positions given the need for large pools of collateral. Moreover we show the risk associated with this agency problem was not priced.


Adam Ashcraft joined the Risk Group of the Federal Reserve Bank of New York (FRBNY) in June 2009.  In his current position, he manages a team responsible for measuring, mitigating, and reporting on the credit risk associated with actual and potential extensions of credit by the Bank.  His team is working on developing the data, infrastructure, and analytics necessary for the System to have real-time views of credit risk independent of credit ratings. 

Before joining the Risk Group, he was actively involved in the design and implementation of the Term Asset-Backed Securities Liquidity Facility (TALF).  Adam joined the bank as a Research Economist in June 2001 after earning a PhD in Economics from the Massachusetts Institute of Economics.  Over his career, he has published academic papers and served as a referee for the top economics and banking journals.  His personal research has focused on impact of banks on the real economy and the impact of regulation on bank behavior.  

Registration Fees:
IAQF Members: Complimentary by registering through this site
Non-Members: $25.00 by registering through this site