Basel III and Asset Securitization
Asset securitization via special purpose entities involves the process of transforming assets into securities that are issued to investors. These investors hold the rights to payments supported by the cash flows from an asset pool held by the said entity. In this paper, we discuss the mechanism by w...
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| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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Wiley
2013-01-01
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| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2013/439305 |
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| author | M. Mpundu M. A. Petersen J. Mukuddem-Petersen F. Gideon |
| author_facet | M. Mpundu M. A. Petersen J. Mukuddem-Petersen F. Gideon |
| author_sort | M. Mpundu |
| collection | DOAJ |
| description | Asset securitization via special purpose entities involves the process of transforming assets into securities that are issued to investors. These investors hold the rights to payments supported by the cash flows from an asset pool held by the said entity. In this paper, we discuss the mechanism by which low- and high-quality entities securitize low- and high-quality assets, respectively, into collateralized debt obligations. During the 2007–2009 financial crisis, asset securitization was seriously inhibited. In response to this, for instance, new Basel III capital and liquidity regulations were introduced. Here, we find that we can explicitly determine the transaction costs related to low-quality asset securitization. Also, in the case of dynamic and static multipliers, the effects of unexpected negative shocks such as rating downgrades on asset price and input, debt obligation price and output, and profit will be quantified. In this case, we note that Basel III has been designed to provide countercyclical capital buffers to negate procyclicality. Moreover, we will develop an illustrative example of low-quality asset securitization for subprime mortgages. Furthermore, numerical examples to illustrate the key results will be provided. In addition, connections between Basel III and asset securitization will be highlighted. |
| format | Article |
| id | doaj-art-ef463d40662b4afaaef36ad3da893287 |
| institution | DOAJ |
| issn | 1026-0226 1607-887X |
| language | English |
| publishDate | 2013-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-ef463d40662b4afaaef36ad3da8932872025-08-20T03:21:14ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2013-01-01201310.1155/2013/439305439305Basel III and Asset SecuritizationM. Mpundu0M. A. Petersen1J. Mukuddem-Petersen2F. Gideon3Faculty of Commerce & Administration, North-West University (Mafikeng Campus), Private Bag x2046, Mmabatho 2735, South AfricaFaculty of Commerce & Administration, North-West University (Mafikeng Campus), Private Bag x2046, Mmabatho 2735, South AfricaFaculty of Commerce & Administration, North-West University (Mafikeng Campus), Private Bag x2046, Mmabatho 2735, South AfricaFaculty of Commerce & Administration, North-West University (Mafikeng Campus), Private Bag x2046, Mmabatho 2735, South AfricaAsset securitization via special purpose entities involves the process of transforming assets into securities that are issued to investors. These investors hold the rights to payments supported by the cash flows from an asset pool held by the said entity. In this paper, we discuss the mechanism by which low- and high-quality entities securitize low- and high-quality assets, respectively, into collateralized debt obligations. During the 2007–2009 financial crisis, asset securitization was seriously inhibited. In response to this, for instance, new Basel III capital and liquidity regulations were introduced. Here, we find that we can explicitly determine the transaction costs related to low-quality asset securitization. Also, in the case of dynamic and static multipliers, the effects of unexpected negative shocks such as rating downgrades on asset price and input, debt obligation price and output, and profit will be quantified. In this case, we note that Basel III has been designed to provide countercyclical capital buffers to negate procyclicality. Moreover, we will develop an illustrative example of low-quality asset securitization for subprime mortgages. Furthermore, numerical examples to illustrate the key results will be provided. In addition, connections between Basel III and asset securitization will be highlighted.http://dx.doi.org/10.1155/2013/439305 |
| spellingShingle | M. Mpundu M. A. Petersen J. Mukuddem-Petersen F. Gideon Basel III and Asset Securitization Discrete Dynamics in Nature and Society |
| title | Basel III and Asset Securitization |
| title_full | Basel III and Asset Securitization |
| title_fullStr | Basel III and Asset Securitization |
| title_full_unstemmed | Basel III and Asset Securitization |
| title_short | Basel III and Asset Securitization |
| title_sort | basel iii and asset securitization |
| url | http://dx.doi.org/10.1155/2013/439305 |
| work_keys_str_mv | AT mmpundu baseliiiandassetsecuritization AT mapetersen baseliiiandassetsecuritization AT jmukuddempetersen baseliiiandassetsecuritization AT fgideon baseliiiandassetsecuritization |