Covered bond market: is legislation impact measurable?

• Autor(a) principal: Alcaide, Filipa Isabel Ferreira
• Data de Publicação: 2010
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/4447
• topic: Legislative covered bonds; Structured covered bonds; Legislation effect; Pricing; Covered bonds legisladas; Covered bonds estruturadas; Efeito legislação

Covered bonds are instruments characterized by specific features that make this product unique and considered by market players as the safest after government bonds. The two types till now existent have as main difference the legal framework. This work studies the two European countries that issued covered bonds before a legislative framework has been creates. The legal framework creates a standardized instrument. In this work we intend to demonstrate the legislation effect on the pricing of covered bonds through a linear regression with variables to evaluate covered bonds and two dummies to capture the impact of special covered bonds law. Empirical results suggest that, although investors seem to favour this type of bonds compared with senior bonds, or even structured covered bonds, we cannot find strong statistical evidence of this relation. This work also defines the characteristics that distinguish these bonds from any other type of bonds and provides a description of financial markets in general and of the covered bond market over the last years.