The strong growth in collateralized debt obligation transactions raises the question how these transactions are designed. The originator designs the transaction so as to maximize her benefit subject to requirements imposed by investors and rating agencies. An important issue in these transactions is the information asymmetry between the originator and the investors. First Loss Positions are the...

The issuance of asset securitization has been subject to a substantial debate by financial regulators and practitioners post the crisis 2008. This study examines impact securitizations on performance stability banks in dual banking system (Islamic conventional). Using unique sample international located 21 countries, our results provide strong evidence that involved are generally riskier less f...

The views expressed in this paper are those of the authors and do not necessarily reflect the position of the Federal Reserve Board, the Federal Reserve Bank of Philadelphia, or Freddie Mac. We Abstract Depository institutions may use information advantages along dimensions not observed or considered by outside parties to " cream‐skim, " meaning to transfer risk to naïve, uninformed, or unconce...

The shadow banking system played a major role in the recent financial crisis but remains largely unregulated. We propose principles for its regulation and describe a specific proposal to implement those principles. We document how the rise of shadow banking was helped by regulatory and legal changes that gave advantages to three main institutions: money-market mutual funds (MMMFs) to capture re...

In this paper, we propose the possibility that the mortgage boom and bust crisis of 2007–2009 might have been caused by financial innovation. We suggest that the astounding rise in subprime and Alt A leverage from 2000 to 2006, together with the remarkable growth in securitization and tranching throughout the 1990s and early 2000s, raised the prices of the underlying assets such as houses and m...