Liu, Luke (2011): Securitization and moral hazard: Does security price matter?(New version).
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This article analyses the effect of security price on the behaviour of bank securitization. We present a model of bank securitization in which security price together with liquid constraints create the incentive for banks to originate and sell assets backed securities to investors. Banks have a comparative advantage in locating and screening projects within their locality. Our results show that under the buyer’s market pricing mechanism the banks with different liquidity constraints can share the risk and the moral hazard problem is not serious; but under the seller’s market pricing mechanism the banks have the incentive to conduct strategic securitization and the moral hazard problem is serious. Our main idea has been supported by the subprime crisis broke in the US in 2007.
|Item Type:||MPRA Paper|
|Original Title:||Securitization and moral hazard: Does security price matter?(New version)|
|English Title:||Securitization and moral hazard: Does security price matter?(New version)|
|Keywords:||Securitization; Security price; Moral hazard|
|Subjects:||C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C50 - General
C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
|Depositing User:||Luke Liu|
|Date Deposited:||20. Apr 2012 13:54|
|Last Modified:||12. Feb 2013 03:39|
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Available Versions of this Item
Securitization and moral hazard: Does security price matter? (deposited 26. Nov 2011 09:43)
- Securitization and moral hazard: Does security price matter?(New version). (deposited 20. Apr 2012 13:54) [Currently Displayed]