The Theory And Reality Of Asset Securitization Risk Mechanism

Asset securitization is one of the important results of financial innovation, the U.S. subprime mortgage crisis has shown the huge potential risks of asset securitization, and revealed the intricacies of macro-financial system, so we have to build risk prevention mechanisms on the asset securitization to avoid crisis. Based on the results of previous studies, combined with analysis of the subprime mortgage crisis, the risks of assets securitization are summarized into three types:cash flow risk, structural risk and systemic risk. The risk investigation has promoted from the merely technical stratification to the systematical stratification. The three risks are classified into two categories, one is arising from the design itself, and it is proposed to prevent from the micro-regulation; the other is systemic risk, it is recommended to prevent from the macro-regulation mainly. In addition, it is not a single individual risk, the risks may transfer among the various economic sectors after suffering negative impact, therefore, a combination of macro and micro supervisory is needed to build to control system risk. The strength and scope of regulation is analyzed by constructing a dynamic game model to make government regulation effectively which as compensation to the micro-regulation. The thesis is trying to build the macro and micro supervisory policy framework.This thesis has followed the simple logical process which includes proposing question, analyzing question and solving it, and using the methods which includes impact analysis of institutional economics, logical reasoning and gambling model to analyze. Firstly, the thesis reviews the literature and describes the system risk theory, isolating risk theory and supervision theory that the thesis based on. Then the thesis describes the theoretical basis of risk and the formation mechanism, and illustrates the great difference between the theory of asset securitization transactions designed and running in the reality from incomplete information gambling model and complete information gambling model.Combining with the subprime mortgage crisis, the thesis draws the conclusion that institutional design is important and reveals the vulnerability of the risk segregation and financial system. Finally, by conducting complete information dynamic gambling mode to make some recommendations for risk prevention, it draws two important conclusions:firstly, the effective supervision point of is that the supervision punishment is equal to the income obtained from the asset securitization; secondly, in addition to micro-prudential, the macro-prudential supervision to prevent the system from the macro risk is also important.Asset securitization is an extremely complex process, through the systematic analysis of its potential risks and making recommendations from the perspective of macro and micro against the risk, it is useful and significance for understanding the financial aspects of risk prevention practices of the international community in the future and forecasting risk of the relevant international financial in the future direction of regulatory.