Ambiguity in securitization markets

Alyssa Gray Anderson

Journal of Banking & Finance, 2019, vol. 102, issue C, 231-255

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 shows how non-fundamental factors such as ambiguity can lead to market freezes and fire sales, as well as reductions in real economic activity. I consider the differing implications of a non-fundamental shock, such as ambiguity, and fundamental shocks, such as changes in risk or a deterioration of expected value. Market outcomes can change more abruptly under ambiguity than under either fundamental deterioration or risk alone. Additionally, ambiguity leads to different policy implications than fundamental shocks do.

Keywords: Securitization; Ambiguity aversion; Market freezes (search for similar items in EconPapers)
JEL-codes: E44 G01 G21 G28 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426619300706
Full text for ScienceDirect subscribers only

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:eee:jbfina:v:102:y:2019:i:c:p:231-255

DOI: 10.1016/j.jbankfin.2019.03.015

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().