Article citationsMore>>

Franke, Günter and Krahnen, Jan Pieter: “Default risk sharing between banks and markets: The contribution of collateralized loan obligations,” in: The Risks of Financial Institutions, NBER book edited by Mark Carey and Rene Stulz, University of Chicago Press, pp. 603–631. 2006.

has been cited by the following article:

• TITLE: How to React to the Subprime Crisis? - The Impact of an Interest Rate Freeze on Residential Mortgage Backed

  AUTHORS: Julia Hein, Thomas Weber

  KEYWORDS: Interest Rate Freeze, Subprime Mortgages, Residential Mortgage, Backed Securities (RMBS)

  JOURNAL NAME: Journal of Service Science and Management, Vol.2 No.4, December 14, 2009

  ABSTRACT: Several policy options have been discussed to mitigate the current subprime mortgage crisis. This paper analyses an interest rate freeze on adjustable rate mortgages as one possible reaction. In particular, the implications on Residential Mortgage Backed Securities (RMBS) are studied. We examine shifts in the underlying portfolio’s discounted cash flow distributions as well as changes in the payment profile of RMBS-tranches. We show that the positive effects of a rate freeze, e.g. less foreclosures and a stabilizing housing market, can outweigh the negative effect of lower interest income such that investors might be better off.