Download or read book Optimal Securitization with Moral Hazard written by Barney Hartman-Glaser and published by . This book was released on 2011 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper considers the optimal design of mortgage backed securities (MBS) in a dynamic setting with moral hazard. A mortgage underwriter with limited liability can engage in costly effort to screen for low risk borrowers and can sell loans to a secondary market. Secondary market investors cannot observe the effort of the mortgage underwriter, but they can make their payments to the underwriter conditional on the mortgage defaults. We find the optimal contract between the underwriter and the investors involves a single payment to the underwriter after a waiting period. The dynamic setting of our model admits three new findings. First, unlike static models that focus on underwriter retention as a means of providing incentives, our model shows that the timing of payments to the underwriter is the key incentive mechanism. Second, the maturity of the optimal contract can be short even though the mortgages are long-lived. Third, selling pooled mortgages is more efficient than selling mortgages individually because pooling allows investors to learn about the underwriter's effort more quickly, an information enhancement effect. Our model also allows an evaluation of standard contracts and shows that the ldquo;first loss piecerdquo; is a very close approximation to the optimal contract.

Download or read book Securitization and Optimal Retention Under Moral Hazard written by Sara Malekan and published by . This book was released on 2015 with total page 122 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Securitization and Optimal Retention Under Moral Hazard written by Sara Malekan and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Form of Retention for Securitized Loans Under Moral Hazard written by Georges Dionne and published by . This book was released on 2015 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Incentives and Securitization of Defaultable Assets written by Semyon Malamud and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We study optimal securitization of defaultable assets in a continuous time setting. A financial intermediary can create a portfolio of defaultable assets and then sell it to outside investors. The default risk of the assets in the portfolio is determined by the unobservable costly effort exerted by the intermediary. We explicitly calculate the optimal contract for any given level of effort and show that the contract may have surprising properties - for example, payment by the investor for default cascades, whereby the investor makes the largest payments to the intermediary after a prescribed number of defaults occurs, one immediately after another. In stark contrast to the conventional wisdom, we show that, even when intermediaries have all the bargaining power, securitization improves the intermediary's screening incentives and increases the equilibrium effort level of the intermediary. Furthermore, the equilibrium effort level and the surplus converge to their first best levels when the number of securitized assets is sufficiently large. securitization, mortgage-backed securities, moral hazard, default risk

Download or read book Optimal Versus Traditional Securities Under Moral Hazard written by Michel A. Robe and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide an explanation of the widespread use of traditional securities by well-established firms. Standard moral hazard models predict that equity, debt and warrants are almost never optimal financing instruments. We show that issuing these securities is, nevertheless, nearly optimal: the issuer would gain very little by using non-traditional securities instead. Combined with equity, one debt issue (without multiple layers of seniority) and one warrant issue (without multiple exercise prices) suffice to achieve near-optimality. The near-optimality of traditional financing depends crucially on the issuer's ability to use warrants in addition to debt and equity.

Download or read book Moral Hazard and Optimal Subsidiary Structure for Financial Institutions written by Charles M. Kahn and published by . This book was released on 2001 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: Because many financial institutions rely heavily on debt finance and have great flexibility in their choice of investments, they may be tempted to exploit debt holders by taking on inefficient but risky investments. Consider a two-subsidiary (quot;bipartitequot;) structure in which one subsidiary is supposed to hold low-risk assets and the other is supposed to hold high-risk assets. By quot;insulatingquot; low-risk assets from high-risk assets, this bipartite structure reduces incentives to engage in risk-shifting in the safer subsidiary. Nevertheless, the risky subsidiary may engage in limited risk-shifting, and the institution may engage in quot;cherry-picking,quot; putting the most profitable high-risk assets in the safer subsidiary and replacing them with inefficient high-risk assets. A bipartite structure is most likely to dominate a unitary structure when risk differs greatly across assets. Our analysis also suggests that institutions may opt for multiple subsidiaries even though this does not appear to take full advantage of gains from diversification. These results help motivate a number of institutional arrangements, including the use of separate commercial bank and finance company subsidiaries, quot;good bank/bad bankquot; structures, securitization, and quot;swapsquot; subsidiaries.

Download or read book Moral Hazard Effort Sensitivity and Compensation in Asset Backed Securitization written by Gang Zhi Fan and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: One interesting explanation for asset securitization is the managerial agency theory - where securitization of cash flows that are relatively insensitive to managerial effort reduces the noise for cash flows that are sensitive to managerial effort (Iacobucci and Winter, 2005). This paper extends this concept in several ways. First, we differentiate the effects of noise and effort sensitivity on managerial effort and compensation, underscoring the importance of a less noisy environment. We also carefully delineate the conditions under which asset securitization would improve the welfare of managers and shareholders of the originating company. Second, we relax the assumptions regarding the expected income-producing function and the income variance, and further take into consideration the change of the marginal production of income with respect to effort before and after securitization. Third, under a multitask principal-agent model framework, we explore how the relationship between managerial activities on different assets affects the incentive compensation for the manager of the originating company and the joint surplus for shareholder and manager. This is particularly relevant when entire buildings are securitized as opposed to pools of income-generating assets. Finally, we examine the role of the third-party servicer.

Download or read book Securitization and Moral Hazard written by Ryan Bubb and published by . This book was released on 2009 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Oxford Handbook of Banking written by Allen N. Berger and published by Oxford University Press. This book was released on 2019-10-31 with total page 1328 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Oxford Handbook of Banking, Third Edition provides an overview and analysis of developments and research in this rapidly evolving field. Aimed at graduate students of economics, banking, and finance; academics; practitioners; regulators; and policy makers, it strikes a balance between abstract theory, empirical analysis, and practitioner and policy-related material. Split into five distinct parts The Oxford Handbook of Banking is a one-stop source of relevant research in banking. It examines the theory of banking, bank operations and performance, regulatory and policy perspectives, macroeconomic perspectives in banking, and international differences in banking structures and environments. Taking a global perspective it examines banking systems in the United States, China, Japan, Australia and New Zealand, Africa, the European Union, transition countries of Europe, and Latin America. Thematic issues covered include financial innovation and technological change; consumer and mortgage lending; Islamic banking; and how banks influence real economic activity. Fully revised and now including brand new chapters on a range of geographical regions, bank bailouts and bail-ins, and behavioral economics amongst many other topics, this third edition of The Oxford Handbook of Banking provides readers with insights to seminal and contemporary research in banking and an opportunity to learn about the diversity of financial systems around the world.

Download or read book The Oxford Handbook of Banking Second Edition written by Allen N. Berger and published by OUP Oxford. This book was released on 2014-11-27 with total page 1105 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Oxford Handbook of Banking, Second Edition provides an overview and analysis of developments and research in banking written by leading researchers in the field. This handbook will appeal to graduate students of economics, banking and finance, academics, practitioners, regulators, and policy makers. Consequently, the book strikes a balance between abstract theory, empirical analysis, and practitioner, and policy-related material. The Handbook is split into five parts. Part I, The Theory of Banking, examines the role of banks in the wider financial system, why banks exist, how they function, and their corporate governance and risk management practices. Part II deals with Bank Operations and Performance. A range of issues are covered including bank performance, financial innovation, and technological change. Aspects relating to small business, consumer, and mortgage lending are analysed together with securitization, shadow banking, and payment systems. Part III entitled Regulatory and Policy Perspectives discusses central banking, monetary policy transmission, market discipline, and prudential regulation and supervision. Part IV of the book covers various Macroeconomic Perspectives in Banking. This part includes a discussion of systemic risk and banking and sovereign crises, the role of the state in finance and development as well as how banks influence real economic activity. The final Part V examines International Differences in Banking Structures and Environments. This part of the Handbook examines banking systems in the United States, European Union, Japan, Africa, Transition countries, and the developing nations of Asia and Latin America.

Download or read book Corporate Risk Management written by Georges Dionne and published by John Wiley & Sons. This book was released on 2019-04-30 with total page 416 pages. Available in PDF, EPUB and Kindle. Book excerpt: An updated review of the theories and applications of corporate risk management After the financial crisis of 2008, issues concerning corporate risk management arose that demand new levels of oversight. Corporate Risk Management is an important guide to the topic that puts the focus on the corporate finance dimension of risk management. The author—a noted expert on the topic—presents several theoretical models appropriate for various industries and empirically verifies theoretical propositions. The book also proposes statistical modeling that can evaluate the importance of different risks and their variations according to economic cycles. The book provides an analysis of default, liquidity, and operational risks as well as the failures of LTCM, ENRON, and financial institutions that occurred during the financial crisis. The author also explores Conditional Value at Risk (CVaR), which is central to the debate on the measurement of market risk under Basel III. This important book: Includes a comprehensive review of the aspects of corporate risk management Presents statistical modeling that addresses recent risk management issues Contains an analysis of risk management failures that lead to the 2008 financial crisis Offers a must-have resource from author Georges Dionne the former editor of The Journal of Risk and Insurance Corporate Risk Management provides a modern empirical analysis of corporate risk management across industries. It is designed for use by risk management professionals, academics, and graduate students.

Download or read book Securitization Economics written by Laurent Gauthier and published by Springer Nature. This book was released on 2020-07-31 with total page 494 pages. Available in PDF, EPUB and Kindle. Book excerpt: Securitization is widely used around the world, and structured products are one of the largest fixed-income asset classes. This textbook guides readers through the complexity of this financial technique and first introduces them to the mechanics of securitization and makes the key concepts, techniques and logic of this field accessible for teachers and students alike. Further, the textbook presents a systematic economic analysis of securitization, asking and answering why it exists, how it works, why it has failed, how complex structures operate, why they are so complex, and many other related questions. The author offers a unique approach, and combines detailed discussions of theoretical economics models with advanced empirical research in order to confront them to the perspective of an experienced practitioner in this market.

Download or read book Financial Economics written by Antonio Mele and published by MIT Press. This book was released on 2022-11-22 with total page 1147 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive reference for financial economics, balancing theoretical explanations, empirical evidence, and the practical relevance of knowledge in the field. This volume offers a comprehensive, integrated treatment of financial economics, tracking the major milestones in the field and providing methodological tools. Doing so, it balances theoretical explanations, empirical evidence, and practical relevance. It illustrates nearly a century of theoretical advances with a vast array of models, showing how real phenomena (and, at times, market practice) have helped economists reformulate existing theories. Throughout, the book offers examples and solved problems that help readers understand the main lessons conveyed by the models analyzed. The book provides a unique and authoritative reference for the field of financial economics. Part I offers the foundations of the field, introducing asset evaluation, information problems in asset markets and corporate finance, and methods of statistical inference. Part II explains the main empirical facts and the challenges these pose for financial economists, which include excess price volatility, market liquidity, market dysfunctionalities, and the countercyclical behavior of market volatility. Part III covers the main instruments that protect institutions against the volatilities and uncertainties of capital markets described in part II. Doing so, it relies on models that have become the market standard, and incorporates practices that emerged from the 2007–2008 financial crisis.

Download or read book Contemporary Financial Intermediation written by Stuart I. Greenbaum and published by Academic Press. This book was released on 2019-05-14 with total page 490 pages. Available in PDF, EPUB and Kindle. Book excerpt: Contemporary Financial Intermediation, 4th Edition by Greenbaum, Thakor, and Boot continues to offer a distinctive approach to the study of financial markets and institutions by presenting an integrated portrait that puts information and economic reasoning at the core. Instead of primarily naming and describing markets, regulations, and institutions as is common, Contemporary Financial Intermediation explores the subtlety, plasticity and fragility of financial institutions and credit markets. In this new edition every chapter has been updated and pedagogical supplements have been enhanced. For the financial sector, the best preprofessional training explains the reasons why markets, institutions, and regulators evolve they do, why we suffer recurring financial crises occur and how we typically react to them. Our textbook demands more in terms of quantitative skills and analysis, but its ability to teach about the forces shaping the financial world is unmatched. Updates and expands a legacy title in a valuable field Holds a prominent position in a growing portfolio of finance textbooks Teaches tactics on how to recognize and forecast fluctuations in financial markets

Download or read book Securitization Past Present and Future written by Solomon Y Deku and published by Springer. This book was released on 2017-08-04 with total page 186 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book aims to explore if and how securitization changed financial intermediation and lending behaviour by reviewing the pre- and post-financial crisis theoretical and empirical literature. The book’s distinctive feature is bringing the growing post-crisis empirical evidence to the attention of a wider audience by critically appraising it against pre-crisis arguments. With its thought-provoking insights, this book is of particular interest for students, practitioners and academics.

Download or read book Determinants of European Banks Engagement in Loan Securitization written by Christina E. Bannier and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: