A Model for Bank’s Optimal Asset Securitization Program
AbstractWe propose a framework to examine banks’ asset securitization program. It provides a comprehensive view that explains various separate findings and claims in the literature. We derive optimal timing and quantity of banks’ asset securitization by explicitly incorporating stochastic asset returns and leverage constraints. We also quantify how much additional value can be created by asset securitization program, which gives some insights into why banks securitize assets. We further conduct some comparative analysis by varying the asset quality and economic environment, obtaining results that can account for the actual securitization trends including the bubble and crisis periods. Our empirical analysis using a Japanese data set also provide evidences that are consistent with our theoretical implications.
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Bibliographic InfoPaper provided by Graduate School of Economics Project Center, Kyoto University in its series Discussion papers with number e-10-003.
Length: 17 pages
Date of creation: Jun 2010
Date of revision:
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Web page: http://www.econ.kyoto-u.ac.jp/projectcenter/
More information through EDIRC
Asset securitization program; Leverage; Impulse control; Bubble and crisis;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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