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Securitisations: tranching concentrates uncertainty

Author

Listed:
  • Adonis Antoniades
  • Nikola Tarashev

Abstract

Even when securitised assets are simple, transparent and of high quality, risk assessments will be uncertain. This will call for safeguards against potential undercapitalisation. Since the uncertainty concentrates mainly in securitisation tranches of intermediate seniority, the safeguards applied to these tranches should be substantial, proportionately much larger than those for the underlying pool of assets.

Suggested Citation

  • Adonis Antoniades & Nikola Tarashev, 2014. "Securitisations: tranching concentrates uncertainty," BIS Quarterly Review, Bank for International Settlements, December.
  • Handle: RePEc:bis:bisqtr:1412f
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    References listed on IDEAS

    as
    1. Tarashev, Nikola, 2010. "Measuring portfolio credit risk correctly: Why parameter uncertainty matters," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2065-2076, September.
    2. Ingo Fender & Nikola Tarashev & Haibin Zhu, 2008. "Credit fundamentals, ratings and value-at-risk: CDOs versus corporate exposures," BIS Quarterly Review, Bank for International Settlements, March.
    3. Gordy, Michael B., 2003. "A risk-factor model foundation for ratings-based bank capital rules," Journal of Financial Intermediation, Elsevier, vol. 12(3), pages 199-232, July.
    4. Ingo Fender & Janet Mitchell, 2009. "The future of securitisation: how to align incentives," BIS Quarterly Review, Bank for International Settlements, September.
    5. Jones, David, 2000. "Emerging problems with the Basel Capital Accord: Regulatory capital arbitrage and related issues," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 35-58, January.
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    Cited by:

    1. repec:wsi:ijtafx:v:20:y:2017:i:08:n:s0219024917500522 is not listed on IDEAS
    2. repec:oup:ecpoli:v:32:y:2017:i:90:p:175-219. is not listed on IDEAS
    3. repec:bpj:aelcon:v:7:y:2017:i:3:p:29:n:2 is not listed on IDEAS
    4. Markus K. Brunnermeier & Sam Langfield & Marco Pagano & Ricardo Reis & Stijn Van Nieuwerburgh & Dimitri Vayanos, 2017. "ESBies: safety in the tranches," Economic Policy, CEPR;CES;MSH, vol. 32(90), pages 175-219.
    5. Gong Feixue & Gregory Phelan, 2017. "Debt Collateralization, Structured Finance, and the CDS Basis," Department of Economics Working Papers 2017-06, Department of Economics, Williams College.
    6. Karl Stacey & Ivailo Arsov & In Song Kim, 2015. "Structural Features of Australian Residential Mortgage-backed Securities," RBA Bulletin, Reserve Bank of Australia, pages 43-58, June.

    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • 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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