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Securitized Products, Financial Regulation, and Systemic Risk

Author

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  • Fujii, Mariko

    (Asian Development Bank Institute)

Abstract

It is widely believed that the practice of securitization is one of the causes that led to the 2007–08 financial crisis. In this paper, I show that securitized products such as collateralized debt obligations (CDO) are particularly vulnerable to systematic risk and tend to show higher tail risk. These characteristics, in turn, are closely associated with joint failures and systemic risk. In order to achieve greater stability of the financial system, it is important to prevent the recurrence of the collapse of specific markets as this may lead to the collapse of other components of the financial system. From this perspective, the financial regulations that should be applied to these problematic financial products and their relation to possible systemic risks are discussed.

Suggested Citation

  • Fujii, Mariko, 2010. "Securitized Products, Financial Regulation, and Systemic Risk," ADBI Working Papers 203, Asian Development Bank Institute.
    • Handle: RePEc:ris:adbiwp:0203
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    Cited by:

    1. Morgan, Peter J. & Lamberte , Mario, 2012. "Strengthening Financial Infrastructure," ADBI Working Papers 345, Asian Development Bank Institute.
    2. Bell, Peter N, 2014. "Farmland Ownership Restrictions: Between a Rock and a Hard Place," MPRA Paper 53033, University Library of Munich, Germany.
    3. Robert E. Prasch & Thierry Warin, 2012. "Moral Hazard and the Mounting of a Crisis: A U.S. Narrative," CIRANO For discussion... 2012dt-03, CIRANO.

    More about this item

    Keywords

    global financial crisis; systemic risk; cdos; financial regulation;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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