Subject The paper addresses the risks inherent in mortgage securitization. Objectives The aim is to formulate hypotheses about risk factors of mortgage-backed securities on the basis of theoretical analysis and to test empirically the significance of these factors for mortgage-backed securities of Russian originators. Methods I performed the empirical testing of the hypotheses using the regression model based on information on mortgage securitization transactions of Russian originators in 2006–2016. Results The analysis of mortgage securitization stages revealed major risk factors of mortgage-backed securities. I offer three types of indicators for their empirical estimate: yield spreads, computed coefficients and statistical ratios. The model evaluation based on information on the Russian mortgage-backed securities market unveils important factors influencing the risks of these financial instruments. The paper provides an explanation of mechanisms and specifics of these factors. Conclusions The model has a high predictive power; it explains more than 80 percent of variants of overall risk incidental to mortgage-backed securities. Significant factors include systematic, country, currency risks, the quality of the pool of underlying assets, deal and tranche structure.
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