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Authors
Advisor(s)
Abstract(s)
This paper surveys the literature examining securitization. Besides describing the economic motivation for the use of
securitization, the paper provides details on securitization characteristics and players, presents the recent trends of
securitization markets, describes the role played by securitization in the 2007-2008 financial crisis, and compares the
financial characteristics of securitization transactions for a large cross-section of ABS, MBS and CDO tranches issued
during the 2000-2011 period. Securitization creates value by increasing liquidity, reducing the cost of funding,
allowing originators to diversify funding sources, improving originators’ risk management, and allowing originators to
benefit from regulatory arbitrage and to improve key financial ratios. However, securitization transactions are complex
undertakings, they are expensive to set up, and increase the deadweight transaction costs associated with principalagent
and asymmetric information problems when used inappropriately.
Description
Keywords
Securitization Structured finance Financial crisis Unconventional monetary policies
Pedagogical Context
Citation
PINTO, João; ALVES, Paulo - The Economics of Securitization: Evidence from the European Markets. Investment Management and Financial Innovations. ISSN 1812-9358. Vol. 13, n.º 1 (2016), p. 112-126