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Who holds the toxic waste? An investigation of CMO holdings

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Abstract

Toxic waste refers to the riskiest derivative structures arising from collateralized mortgage obligations (CMOs). We use simulations to predict how this risk would manifest itself in various interest rate environments. We also look for evidence on the total dollar value of these securities, who holds them, and how much they hold. Very limited public information is available, but commercial banks are required to report on their holdings, and we investigate the extent to which the risk is concentrated in that sector.

Suggested Citation

  • Joseph G. Haubrich & Deborah Lucas, 2007. "Who holds the toxic waste? An investigation of CMO holdings," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Jun.
    • Handle: RePEc:fip:fedcpd:y:2007:i:jun:n:20
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    Cited by:

    1. Kristopher Gerardi & Andreas Lehnert & Shane M. Sherlund & Paul Willen, 2008. "Making Sense of the Subprime Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 69-159.

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    Keywords

    Derivative securities; Mortgages;

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