Securitization Markets and Mechanisms

Rasheed Saleuddin

Chapter 2 in Regulating Securitized Products, 2015, pp 20-60 from Palgrave Macmillan

Abstract: Abstract In order to better understand my arguments, principles and recommenda-tions for a new regulatory regime, it is necessary to appreciate some of the less-well understood characteristics of the securitization markets and structures. One example of the need to understand the complexities of the asset class in order to design appropriate policies and regulations, is that an evaluation of the retention rule intended to align the interests of originators of loans and investors demands a detailed understanding of how arrangers and originators are compensated. This, in turn, requires an evaluation of some important characteristics of securitization such as ‘excess spread’ and ancillary income. A blind focus on the amount of principal risk taken, regardless of when and how the risks are taken will often miss the net risk and reward taken by an investor, as I shall show conceptually and mathematically in Chapter 5.

Keywords: Cash Flow; Balance Sheet; Credit Default Swap; Asset Class; Commercial Real Estate (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-49795-6_2

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DOI: 10.1057/9781137497956_2

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