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Structured Products: Implications for Financial Markets

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  • Adrian Blundell-Wignall
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    Abstract

    The paper looks at financial market innovation and how it has led to the rapid growth of structured products. It explores the mechanisms that come into play as assets inside these products (mortgages, credit card receivables, etc.) suffer losses. The potential size of such losses is currently concerning financial markets, and the paper looks at various ways to quantify the issues and where, going forward, pressures are most likely to arise. The problem is seen mainly as a stock adjustment issue (related to inventories of assets etc.) that is going to require time to set right. Time could well be more important than the cost of capital. The idea of a super fund to buy up unwanted assets should be seen in this context. The paper goes on to look at financial market implications, including the credit supply process, spreads, and the dollar.

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    File URL: http://dx.doi.org/10.1787/fmt-v2007-art13-en
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    Bibliographic Info

    Article provided by OECD Publishing in its journal Financial Market Trends.

    Volume (Year): 2007 (2007)
    Issue (Month): 2 ()
    Pages: 27-57

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    Handle: RePEc:oec:dafkab:5l4cvgvtvs41

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    Cited by:
    1. Sabrina Khanniche, 2009. "Evaluation of Hedge Fund Returns Value at Risk Using GARCH Models," EconomiX Working Papers 2009-46, University of Paris West - Nanterre la Défense, EconomiX.
    2. Thomas Goda & Photis Lysandrou, 2011. "The contribution of wealth concentration to the subprime crisis: a quantitative estimation," DOCUMENTOS DE TRABAJO CIEF 010718, UNIVERSIDAD EAFIT.
    3. Jörg Bibow, 2010. "Alternative Strategien der Budgetkonsolidierung in Österreich nach der Rezession," IMK Studies 03-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Manconi, Alberto & Massa, Massimo & Yasuda, Ayako, 2012. "The role of institutional investors in propagating the crisis of 2007–2008," Journal of Financial Economics, Elsevier, vol. 104(3), pages 491-518.
    5. Adrian Blundell-Wignall & Caroline Roulet, 2012. "Business models of banks, leverage and the distance-to-default," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2012(2), pages 7-34.
    6. Nedelchev, Miroslav, 2010. "Корпоративно Управление На Финансови Групи (Спазвай И Обяснявай)
      [Corporate Governance of Financial Groups (Comply and Explain)]
      ," MPRA Paper 52249, University Library of Munich, Germany.
    7. repec:rom:campco:v:9:y:2013:i:1:p:43-54 is not listed on IDEAS
    8. Goda, Thomas & Lysandrou, Photis & Stewart, Chris, 2013. "The contribution of US bond demand to the US bond yield conundrum of 2004–2007: An empirical investigation," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 113-136.
    9. Blundell-Wignall, Adrian & Atkinson, Paul, 2009. "Origins of the financial crisis and requirements for reform," Journal of Asian Economics, Elsevier, vol. 20(5), pages 536-548, September.
    10. Manconi, Alberto & Massa, Massimo & Yasuda, Ayako, 2010. "The Behavior of Intoxicated Investors: The Role of Institutional Investors in Propagating the Crisis of 2007-2008," Working Papers 10-22, University of Pennsylvania, Wharton School, Weiss Center.

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