Abstract

The reasons for the strong rise in the securitization phenomenon up until the start of the “subprime crisis” need to be analysed. According to many authors, they mainly stem from its offering the possibility of generating fixed yield securities with the highest rating and a low risk premium, thanks to the issues being structured in differentiated bond series, so that certain series absorb most of the risk, thus facilitating the safer or “senior” tranches having a higher rating. Accordingly, this paper reviews the literature on the factors underlying the generation of differentiated tranches in this type of issues and regarding the determining factors of the yield offered by securitization issues. It concludes that the search for more complete markets, along with the reducing of problems associated to the moral hazard, are the main reasons for the multi-tranche structuring. And given the strong influence of the number of tranches on the yield offered by the issues, the paper likewise concludes that the multitranche structures has been an efficient tool to place securitization issues with more competitive yields.

Full Text
Paper version not known

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.