This paper implements a simple and transparent procedure for setting loan-to-value (LTV) ratio based on the market risk of the underlying collateralized portfolio. The loan hair cut (i.e. 1-LTV) is closely related to value-at-risk (VaR) which is very sensitive to model assumptions and...

This study analyses the level of systematic risk for US mortgage portfolio securitisationsbased on the variation of default rates which cannot be explained by observeddeterministic factors. Systematic risk is decomposed into general systemic risk, ratingclass-specific systematic risk and their...