Securitization and asset prices

Yunus Aksoy and Henrique Basso

No 1526, Working Papers from Banco de España

Abstract: We investigate the link between securitization and asset prices and show that increases in the growth rate of the volume of ABS issuance lead to a sizable decline in bond and equity premia. Furthermore, we show that in a model where banks select their portfolio of assets and create synthetic securities, the compensation for undertaking risk decreases as securitization increases. The pooling and tranching of credit assets relaxes both the funding and the risk constraints banks face allowing them to increase balance sheet holdings. Accordingly, the drop in risk premium may be unrelated to a decline in actual risk.

Keywords: pooling and tranching; equity; government bonds; bank portfolio; risk premia (search for similar items in EconPapers)
JEL-codes: E44 G12 G2 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2015-09
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... /15/Fich/dt1526e.pdf First version, September 2015 (application/pdf)

Related works:
Working Paper: Securitization and Asset Prices (2015)
Working Paper: Securitization and Asset Prices (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1526

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