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Market Value Signal Extraction and the Misapplication of SFAS 133 in the U.S. GSE's

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  • Xanthopoulos, Apostolos

Abstract

The misapplication of the Statement of Financial Accounting Standards 133 in the U.S. Government-Sponsored Enterprises had obscured the first signals of trouble in mortgage securities. Still, regulators should have detected signals using their market value of equity measure, after statistical modification of related balance sheet accounts. The nonlinearity in this measure would imply that any implementation by management could significantly understate the exposure of portfolio equity to interest rate changes.

Suggested Citation

  • Xanthopoulos, Apostolos, 2010. "Market Value Signal Extraction and the Misapplication of SFAS 133 in the U.S. GSE's," The Journal of Economic Asymmetries, Elsevier, vol. 7(2), pages 57-75.
    • Handle: RePEc:eee:joecas:v:7:y:2010:i:2:p:57-75
    DOI: 10.1016/j.jeca.2010.02.004
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    More about this item

    Keywords

    C53; G18; H83; Logistic Regression; Prepayments; Principal Components; SFAS 133;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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