Trading Activity and Transaction Costs in Structured Credit Products

26 Pages Posted: 26 Nov 2012 Last revised: 22 Feb 2014

See all articles by Hendrik Bessembinder

Hendrik Bessembinder

Arizona State University; W.P. Carey School of Business

William F. Maxwell

Southern Methodist University (SMU) - Finance Department

Kumar Venkataraman

Southern Methodist University (SMU) - Finance Department

Date Written: July 20, 2013

Abstract

After conducting the first study of secondary trading in structured credit products, the authors report that the majority of products did not trade even once during the 21-month sample. Execution costs averaged 24 bps when trades occurred and were considerably higher for products with a greater proportion of retail-size trades. The authors estimate that the introduction of public trade reporting would decrease trading costs in retail-oriented products by 5-7 bps.

Keywords: ABS, MBS, Structured Products, Transparency, mortgage-backed, asset-backed

JEL Classification: G10, G20, G28

Suggested Citation

Bessembinder, Hendrik (Hank) and Maxwell, William F. and Venkataraman, Kumar, Trading Activity and Transaction Costs in Structured Credit Products (July 20, 2013). Financial Analysts Journal, Vol. 69, No. 6, 2013, Available at SSRN: https://ssrn.com/abstract=2180961 or http://dx.doi.org/10.2139/ssrn.2180961

Hendrik (Hank) Bessembinder

Arizona State University ( email )

PO Box 873906
Tempe, AZ 85207
United States

W.P. Carey School of Business ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

HOME PAGE: http://https://wpcarey.asu.edu/people/profile/2717225

William F. Maxwell (Contact Author)

Southern Methodist University (SMU) - Finance Department ( email )

United States

Kumar Venkataraman

Southern Methodist University (SMU) - Finance Department ( email )

United States
214-768-7005 (Phone)
214-768-4099 (Fax)

HOME PAGE: http://people.smu.edu/kumar/

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