Default Behavior of Global Structured Finance Securities

Abstract

This article documents the 12-month default rate of global structured securities rated by Standard and Poor's during the period between January 1995 and June 2004. It provides overall default rates and descriptive statistics, such as volatility and correlation coefficients, default rate sensitivity (beta), and default rates by different rating categories and sectors. The results show that the global structured default rate has declined in recent months and that the speculative-grade default rate has accounted for a significant percentage of the structured finance default rate. These empirical results provide evidence for overall improvement in the rating performance of global structured finance securities in recent years. The study also compares the default rates of corporate and structured securities; documents the lifetime-to-date default rates by original ratings; and finally analyzes vintage default rates in terms of years since origination of global structured securities.