TY - JOUR T1 - Joint Obligation Ratings in Consumer ABS JF - The Journal of Structured Finance SP - 50 LP - 54 DO - 10.3905/jsf.2011.17.1.050 VL - 17 IS - 1 AU - Thomas Adams AU - Ann Rutledge AU - Sylvain Raynes Y1 - 2011/04/30 UR - https://pm-research.com/content/17/1/50.abstract N2 - Current rating agency practices do not appear to factor into the ratings of insured consumer asset-backed securities (ABS) the effects of correlation between an insurer default and a transaction default. As a result, the rating agencies assign lower ratings to insured bonds from consumer ABS transactions even when the performance of the underlying assets and the performance of the insurer may have a low correlated probability of default. In this article, the authors’ goal is to show the significant rating impact of correlation. They provide a detailed analysis and conclude that a significant rating benefit could be conferred by the proper inverse correlation structure.TOPICS: Asset-backed securities (ABS), portfolio theory, portfolio construction ER -