
Contents
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15.1 Introduction 15.1 Introduction
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15.2 The Evolution of Securitization 15.2 The Evolution of Securitization
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15.3 Mechanics of Securitization 15.3 Mechanics of Securitization
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15.3.1 Asset Selection 15.3.1 Asset Selection
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15.3.2 Creation of an SPV and Transfer of Assets 15.3.2 Creation of an SPV and Transfer of Assets
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15.3.3 Structuring the Transaction 15.3.3 Structuring the Transaction
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15.3.4 Issuance of Asset-Backed Securities 15.3.4 Issuance of Asset-Backed Securities
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15.3.5 Allocation of Cash Flows 15.3.5 Allocation of Cash Flows
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15.4 Benefits and Risks of Securitization 15.4 Benefits and Risks of Securitization
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15.4.1 Originators 15.4.1 Originators
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15.4.2 Borrowers 15.4.2 Borrowers
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15.4.3 Investors 15.4.3 Investors
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15.4.4 Economy 15.4.4 Economy
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15.5 Concluding Remarks: Regulatory Reforms and the Future of Securitization 15.5 Concluding Remarks: Regulatory Reforms and the Future of Securitization
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References References
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15 Securitization
Get accessBarbara Casu is the Director of the Centre for Banking Research at Cass Business School, where she is Professor of Banking and Finance. Her main research interests are in empirical banking, although several of her research projects are cross-disciplinary and include aspects of financial regulation, structured finance, accounting and corporate governance. She has published widely, with over forty publications in peer-reviewed journals. She has also written the popular textbook Introduction to Banking (Pearson FT, 2015), which is widely adopted for banking courses across the world. She has recently co-edited the Palgrave Handbook of European Banking.
Anna Sarkisyan is a Lecturer in Banking and Finance at Essex Business School, University of Essex (UK). Her research focuses on securitization, corporate governance, and performance in banking. She holds a Ph.D in Finance from Cass Business School, City, and University of London. In 2010, she was awarded a Lamfalussy Fellowship from the European Central Bank.
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Published:07 April 2015
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Abstract
Securitization, a structured process involving the transformation of illiquid assets into marketable securities, experienced an exponential growth in the 1990s and early 2000s. After a prolonged period of rapid expansion, securitization markets froze in 2008, as investors lost confidence in structured products. This chapter charts the rise and fall of securitization and attempts to map the future of the market by identifying the key issues that need to be addressed: (1) the alignment of incentives; (2) the reduction of complexity; (3) increase in transparency; and (4) improvements in the use of credit ratings. Despite its controversial role during the 2007–08 financial crisis, the economic importance of securitization is undeniable. Several policy interventions at the national and international levels have recently been enacted to accelerate the recovery of the market, as there is an emerging consensus that the benefits of high-quality securitization outweigh the costs and that this technique can play a key role to foster economic recovery and growth.
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