How to Measure Securitization: A Structural Equation Approach

van der Plaat, Mark T. (2021): How to Measure Securitization: A Structural Equation Approach.

Abstract

Securitization is a popular concept in banking and finance. Empirical literature measures securitization with a wide range of variables, which raises the question how to measure securitization. Using a structural equation modeling approach, we examine whether proxy variables used in the literature have a common securitization factor. We find that there are two common factors for ABS-CDO securitization, and ABCP securitization. These factors correlate strongly with factors for loan sales and credit derivatives, indicating that these four factors together are used by banks to hedge credit risk. We present some recommendations to improve the measurement of securitization.

• Item Type: MPRA Paper
• Language: English
• Keywords: Securitization; Asset-Backed Securities; Collateralized Debt Obligations; Asset-Backed Commercial Papers; Loan Sales; Credit Derivatives; Credit Default Swaps; Latent Variables; Proxy Variables; Latent Variable Analysis; Structural Equation Modeling; Exploratory Factor Analysis; Confirmatory Factor Analysis
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C38 - Classification Methods ; Cluster Analysis ; Principal Components ; Factor Models; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors

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