1 / 11

Importance of Securitization

Importance of Securitization. The Financial Crisis. Run on the Repos. The Financial Crisis. Regression Results. Roughly same results for repo spreads. Rise in LIB-OIS (proxy for counterparty credit risk in banking system) leads to increase in spreads.

joey
Download Presentation

Importance of Securitization

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Importance of Securitization

  2. The Financial Crisis

  3. Run on the Repos

  4. The Financial Crisis

  5. Regression Results • Roughly same results for repo spreads. • Rise in LIB-OIS (proxy for counterparty credit risk in banking system) leads to increase in spreads. • Repo haircuts depend on expected volatility in underlying collateral • More expected volatility implies larger haircuts.

  6. Implications • Problems in sub-prime market led to higher LIB-OIS. • Higher LIB-OIS lead to larger credit spreads on securitized bonds and repos. • Higher credit spreads led to more uncertainty about bank solvency and lower values for repo collateral. • Concerns about liquidity of bonds used for repo collateral led to rising repo haircuts (equivalent to a bank run).

More Related