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Portfolio sales and signaling

Author

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  • Bougheas, Spiros
  • Worrall, Tim

Abstract

This paper extends the DeMarzo and Duffie (1999) signaling model from single sales to portfolio sales. It shows that the extended model can account for retention of low quality assets and help explain why retained assets may be of varying quality.

Suggested Citation

  • Bougheas, Spiros & Worrall, Tim, 2019. "Portfolio sales and signaling," Journal of Banking & Finance, Elsevier, vol. 99(C), pages 182-191.
    • Handle: RePEc:eee:jbfina:v:99:y:2019:i:c:p:182-191
    DOI: 10.1016/j.jbankfin.2018.12.008
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    References listed on IDEAS

    as
    1. Spiros Bougheas, 2014. "Pooling, tranching, and credit expansion," Oxford Economic Papers, Oxford University Press, vol. 66(2), pages 557-579.
    2. Pagès, Henri, 2013. "Bank monitoring incentives and optimal ABS," Journal of Financial Intermediation, Elsevier, vol. 22(1), pages 30-54.
    3. Walentin, Karl, 2014. "Business cycle implications of mortgage spreads," Journal of Monetary Economics, Elsevier, vol. 67(C), pages 62-77.
    4. Chris Downing & Dwight Jaffee, 2009. "Is the Market for Mortgage-Backed Securities a Market for Lemons?," The Review of Financial Studies, Society for Financial Studies, vol. 22(7), pages 2257-2294, July.
    5. Gary B. Gorton & Nicholas S. Souleles, 2007. "Special Purpose Vehicles and Securitization," NBER Chapters, in: The Risks of Financial Institutions, pages 549-597, National Bureau of Economic Research, Inc.
    6. Mark Carey & René M. Stulz, 2007. "The Risks of Financial Institutions," NBER Books, National Bureau of Economic Research, Inc, number care06-1, July.
    7. repec:oup:rfinst:v:25:y::i:11:p:3217-3258 is not listed on IDEAS
    8. Tobias Berg & Anthony Saunders & Sascha Steffen, 2016. "The Total Cost of Corporate Borrowing in the Loan Market: Don't Ignore the Fees," Journal of Finance, American Finance Association, vol. 71(3), pages 1357-1392, June.
    9. Peter M. DeMarzo, 2005. "The Pooling and Tranching of Securities: A Model of Informed Intermediation," The Review of Financial Studies, Society for Financial Studies, vol. 18(1), pages 1-35.
    10. Leland, Hayne E & Pyle, David H, 1977. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 32(2), pages 371-387, May.
    11. Mitchell, Janet & Fender, Ingo, 2009. "Incentives and Tranche Retention in Securitisation: A Screening Model," CEPR Discussion Papers 7483, C.E.P.R. Discussion Papers.
    12. G.M. Constantinides & M. Harris & R. M. Stulz (ed.), 2013. "Handbook of the Economics of Finance," Handbook of the Economics of Finance, Elsevier, volume 2, number 2-b.
    13. G.M. Constantinides & M. Harris & R. M. Stulz (ed.), 2013. "Handbook of the Economics of Finance," Handbook of the Economics of Finance, Elsevier, volume 2, number 2-a.
    14. Cem Demiroglu & Christopher James, 2012. "How Important is Having Skin in the Game? Originator-Sponsor Affiliation and Losses on Mortgage-backed Securities," The Review of Financial Studies, Society for Financial Studies, vol. 25(11), pages 3217-3258.
    15. Hartman-Glaser, Barney, 2017. "Reputation and signaling in asset sales," Journal of Financial Economics, Elsevier, vol. 125(2), pages 245-265.
    16. Carey, Mark & Stulz, René M. (ed.), 2007. "The Risks of Financial Institutions," National Bureau of Economic Research Books, University of Chicago Press, number 9780226092850, November.
    17. Peter DeMarzo & Darrell Duffie, 1999. "A Liquidity-Based Model of Security Design," Econometrica, Econometric Society, vol. 67(1), pages 65-100, January.
    18. Gorton, Gary B. & Pennacchi, George G., 1995. "Banks and loan sales Marketing nonmarketable assets," Journal of Monetary Economics, Elsevier, vol. 35(3), pages 389-411, June.
    19. Benjamin J. Keys & Tanmoy Mukherjee & Amit Seru & Vikrant Vig, 2010. "Did Securitization Lead to Lax Screening? Evidence from Subprime Loans," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(1), pages 307-362.
    20. Mr. John Kiff & Michael Kisser, 2010. "Asset Securitization and Optimal Retention," IMF Working Papers 2010/074, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Securitization; Signaling; Skin in the game;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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