Dealers overpricing CLNs, research suggests
Information asymmetry and illiquidity driving up prices
Credit-linked notes (CLNs) are routinely overpriced by major issuers and the secondary market due to a variety of factors, ranging from shrinking retail demand to patchy liquidity, new research suggests.
Matthias Walter, Björn Häckel and Andreas Rathgeber of the University of Augsburg in Germany compared CLN prices in the primary and secondary markets with fair prices derived from the products' underlying bonds and their credit default swaps.
Rathgeber's earlier research had already found
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