The Economics of Structured Finance.

Coval, J., Jurek, J., & Stafford, E. (2009). The Economics of Structured Finance. Journal of Economic Perspectives, 23(1), 3-25.

Type

Journal article

Intellectual base

Primary research

Year

2009

Volume

23

Issue

1

Pages

3-25

DOI

10.1257/jep.23.1.3

DOI registrant

American Economic Association

Link

https://doi.org/10.1257/jep.23.1.3

Cited from

economics_finance

Cited by

1 citation across 1 artifact.

Each citation links to the sentence it supports in the citing article.

Primes

• Signal Devaluation
  • The demand-side pressure is structured-product issuers needing AAA tranches to sell to mandate-constrained buyers (pension funds permitted to hold only top-rated paper).

    This sourceExplains how structured-finance tranching manufactured AAA-rated securities to meet demand from mandate-constrained buyers.

    Supported in partVerified against the publisher's abstract

    The abstract confirms that tranching manufactured AAA-rated 'safe' assets certified by rating agencies, but not that demand came from mandate-constrained buyers such as pension funds, nor the supply-elasticity claim.

    “As a result of the prioritization scheme used in structuring claims, many of the manufactured tranches are far safer than the average asset in the underlying pool. This ability of structured finance to repackage risks and to create “safe” assets from otherwise risky collateral led to a dramatic expansion in the issuance of structured securities, most of which were viewed by investors to be virtually risk-free and …”

    Read by an automated reader; not a human review. How support was checked

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