We take an asset pricing approach to model the funding advantage of Government Sponsored Enterprises (GSEs) such as Fannie Mae and Freddie Mac. In order to replicate some stylized facts, we extend a referenced model to incorporate defaultability of mortgage agencies. The model implies that the...

In its complexity and its vulnerability to market volatility, the CPDO might be viewed as the poster child for the excesses of financial engineering in the credit market. This paper examines the CPDO as a case study in model risk in the rating of complex structured products. We demonstrate that...

In its complexity and its vulnerability to market volatility, the constant proportion debt obligation (CPDO) might be viewed as the poster child for the excesses of financial engineering in the credit market. This paper examines the CPDO as a case study in model risk in the rating of complex...