In response to the financial crisis, as a way to align incentives of originators and investors,
new regulation in the US (Dodd-Frank) and the EU (CRR) requires issuers of asset backed
securities to hold some skin-in-the-game, offering a set of options for risk retention. We
propose an intuitive metric exposing effective risk retention and demonstrate that it varies
widely across the available retention options. Requiring open disclosure of the metric, rather
than demanding choice among arbitrarily specified and dissimilar retention options, would
allow markets to price retention properly, and issuers to choose their desired retention level
freely.