Ambiguity in Securitization Markets

Alyssa G. Anderson
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Alyssa G. Anderson: https://www.federalreserve.gov/econres/alyssa-g-anderson.htm

No 2015-33, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: During the financial crisis of 2008, origination and trading in asset-backed securities markets dropped dramatically. I present a model with ambiguity averse investors to explain how such a market freeze could occur and to investigate how ambiguity affects origination and securitization decisions. The model captures many features of the crisis, including market freezes and fire sales, as well as the timing and duration of the freeze. The presence of ambiguity also reduces real economic activity. Lastly, I consider the differing implications of ambiguity and risk, as well as the role of policies that reduce ambiguity during market freezes.

Keywords: Structured finance; ambiguity aversion; market freezes (search for similar items in EconPapers)
JEL-codes: E44 G01 G21 G28 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2015-05-13
New Economics Papers: this item is included in nep-fmk and nep-upt
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http://www.federalreserve.gov/econresdata/feds/2015/files/2015033pap.pdf Full text (application/pdf)
http://dx.doi.org/10.17016/FEDS.2015.033 http://dx.doi.org/10.17016/FEDS.2015.033 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2015-33

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