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Analysis of ABCP Runs: Patterns and Factors in 2007 Crisis

This study presents empirical results on Asset-Backed Commercial Paper (ABCP) programs' runs in 2007, highlighting the prevalence, timing, and characteristics influencing them. The findings show that riskier programs were more susceptible to runs, affecting issuance and market variables.

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Analysis of ABCP Runs: Patterns and Factors in 2007 Crisis

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  1. Definition of a Run

  2. Empirical Results • A substantial number of ABCP programs experienced a run in the last five months of 2007 • About 30% of programs were in a run within weeks of the onset of the ABCP crisis (August 9th, 2007) • Nearly 40% of programs were in a run at the end of 2007, and the odds of exiting were very low. • Declines in outstandings at programs experiencing runs accounted for most of the drop in ABCP outstanding in 2007.

  3. Empirical Results • Runs were not random but instead were significantly more likely at riskier programs – based on program characteristics, program type, sponsor type, and macro-financial variables. • For programs that could issue, yield spreads and maturities of new issues had explainable variation during the crisis and the determinants were similar to those that help explain runs.

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