Did Subjectivity Play a Role in CDO Credit Ratings ?

  title={Did Subjectivity Play a Role in CDO Credit Ratings ?},
  author={John M. Griffin},
Analyzing 916 CDOs issued from January 1997 to December 2007, we find that a credit rating agency frequently made adjustments beyond its main model. The adjustments were typically positive and amounted to AAA tranche sizes 12.1% larger than implied by the rating agency model. These adjustments are difficult to explain by likely determinants, but exhibit a clear pattern: CDOs with smaller model-implied AAA sizes receive larger adjustments. However, CDOs with larger adjustments experience more… CONTINUE READING
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