Securitization of Receivables - An Analysis of the Inherent Risks

Fernando Antonio Perrone Pinheiro () and José Roberto Ferreira Savoia ()
Additional contact information
Fernando Antonio Perrone Pinheiro: FEA USP
José Roberto Ferreira Savoia: FEA USP

Brazilian Review of Finance, 2009, vol. 7, issue 3, 305-326

Abstract: Securitization is a modality of structured finance which allows a company to raise funds based on its receivables through capital markets. In Brazil, securitization was developed mostly in the form of mutual funds - the FIDC, which raise money by issuing senior cotes for qualified investors, and subordinated cotes, usually bought by the company that originated the receivables. This paper evaluates the risk and return for both kinds of investors through a stochastic model with two main variables: interest rates and default rates. The model is still sensible to the characteristics of the fund, like the amount of subordinated cotes, the type of asset being securitized; and the amount of receivables in relation to the assets. Regarding the case of senior cotes, the risk of returns under the basic level of interest rates is highly improbable; and in the case of subordinated cotes, the risk of returns under the basic interest rate may be considered still low, due to the high spreads observed in the Brazilian financial market. The simulations indicated that under historically mean interest rate volatility the default rates are the main component of the total risk. Accordingly to the developed analysis of international standards of regulation, the Brazilian Central Bank imposes very strong capital requirements to banks that securitize their assets and purchase the corresponding subordinated cotes.

Keywords: securitization; FIDC; receivables; credit risk; structured finance. (search for similar items in EconPapers)
JEL-codes: G20 G28 G32 G33 (search for similar items in EconPapers)
Date: 2009
References: Add references at CitEc
Citations:

Downloads: (external link)
http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/download/1353/1041 (application/pdf)
http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/view/1353 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:7:y:2009:i:3:p:305-326

Access Statistics for this article

Brazilian Review of Finance is currently edited by Marcio Laurini

More articles in Brazilian Review of Finance from Brazilian Society of Finance
Bibliographic data for series maintained by Marcio Laurini ().