Standard & Poor's Peter Jones looks at the difficulties of valuing asset-backed securities.
Asset-backed securities (ABS) comprise the asset classes most widely blamed for the onset of the 2007-09 financial crisis. Indeed, the beginning of the crisis is often blamed on the flood of redemptions from ABS funds from banks such as Bear Stearns, caused by a loss of confidence in the asset class as defaults in the underlying US sub-prime mortgages spiked. In August 2007, French investment bank BNP Paribas reported it had no way of fairly valuing its holdings in US sub-prime mortgage securitisations, triggering the hiatus in the inter-bank money markets as banks lost faith in each oth...
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