Abstract
We develop a method to estimate value of structuring in a segmented markets. The approach is based on the understanding that a structuring entity such as investment bank stands to gain from tailoring cash flows to suit specific preferences of investors in a segmented market environment. We compute the value of each tranche conditional on the prices of other tranches. We then compare actual market prices and conditional expectations. The greater the mismatch between actual prices and conditional expectations, the larger is the value of structuring.
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