We address the moral hazard problem of securitization using a principal-agent model where the investor is the principal and the lender is the agent. Our model considers structured asset-backed securitization with a credit enhancement (tranching) procedure. We assume that the originator can...

Securitization is one of the most important innovations in financial markets. It is a process of converting illiquid loans that cannot be sold readily to third-party investors into liquid securities and selling them to dispersed investors. As a result, securitization improves liquidity in...

We address the moral hazard problem of securitization using a principal-agent model where the investor is the principal and the lender is the agent. Our model considers structured asset-backed securitization with a credit enhancement procedure. We assume that the originator can affect the...

We address the moral hazard problem of securitization using a principal-agent model where the investor is the principal and the lender is the agent. Our model considers structured asset-backed securitization with a credit enhancement (tranching) procedure. We assume that the originator can...

Securitization improves liquidity in capital markets by allowing originators to remove issued loans from its balance sheet and use the proceeds for other purposes. Securitization is often suspected of being one of the main reasons for the recent financial crisis. One concern is that...

Securitization is one of the most important innovations in financial markets. It is a process of converting illiquid loans that cannot be sold readily to third-party investors into liquid securities and selling them to dispersed investors. As a result, securitization improves liquidity in...