Research On Risks And Yields Of Asset Securitization

As one of new innovated financial products, asset securitization provides a new choice for both financing and investment by its outstanding advantage in capital markets and it has led the active transactions for decades. In the article, we will analyze the yields and the risks for financing and investment and try to give a conclusion for them.In chapter 1, on the basis of investigating the stock market, the bond market and the bank credit market in China, it can be found that there exists a bottle-neck for financing and investment, which may be described as the unbalance of yields and risks, the lack of the channels for financing and investment. Also, the reason for selecting the subject "the yields and the risks for asset securitization", the methods and the frame for analysis will be pointed out in this chapter. In chapter 2, we will review the history for asset securitization in both western countries and in China, will describe the accurate meaning and the specific operating direction of asset securitization, will analyze the core principle, i.e., the principle of capital restructuring, the principle of risk segregating, the principle of credit upgrading and the principle of cash flow analyzing.In chapter 3, the yields and the risks will be broken down in details. From the point of macro-view, asset securitization can stimulate reforms in terms of structure efficiency, distribution efficiency and operation efficiency in financial network. From the point of micro-view, besides for the obtaining new financing channels, the initiator can cut down its financing cost, minimize the inter-communication cost, better the capital structure and promote the capability of earning money effectively through asset securitization. For investors, asset securitization provide the probability of getting higher return of investment with lower risk, of realizing portfolios diversification and of lowering the uncertainty of investment.In chapter 4, we will reason the risks in asset securitization. Firstly, transaction structure risk which is consisted of revocable transaction risk, re-characterization risk, commingling risk and substantive consolidation risk; Secondly, defaulted risk caused by violating the contracts of transactions; thirdly, pricing risk including the factors of interest rate, the rate of interest ranging, refund period and early refunding; fourthly, risk of information asymmetry, which contains asymmetry between initiator and its manager and asymmetry between external investors and internal persons; Fifthly, the other potential risks.