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date: 24 January 2019

Abstract and Keywords

This article starts by introducing some of the main instruments used in the securitization markets, which are often utilized as building blocks to construct more complex instruments. It then briefly reviews the spectacular increase in securitization that occurred globally and considers the main originators' motives for using those instruments. The last section discusses some potential effects of securitization on how banks operate, on the broad financial system, on risk taking, and on the transmission mechanism of monetary policy. Throughout, the article considers the effects of the recent crisis on credit markets and dwells on how it has affected securitization and more broadly the markets for credit risk transfers. It illustrates the repricing both for corporate credit risk as well as for US subprime ‘asset-backed securities’.

Keywords: securitization markets, securitization instruments, monetary policy, US subprime asset-backed securities, credit market, credit risk transfer

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