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What did Frederick the great know about financial engineering? A survey of recent covered bond market developments and research

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  • Larsson, Carl F.

Abstract

This article is a survey of the covered bond market with a focus on recent developments in the U.S. Covered bonds are debt obligations secured by a pool of assets, usually consisting of residential mortgages or other public debt. The covered bond asset pool is ring-fenced, dynamically managed, and remains on the balance sheet of the issuer. The issuer replaces non-performing assets and maintains a minimum overcollateralization level. U.S. lawmakers, regulators, and financial institutions are currently working toward jump-starting a market for U.S. issued covered bonds. Recent academic research has focused on the determinants of covered bond spreads and whether these instruments can become an alternative source of mortgage financing in the U.S.

Suggested Citation

  • Larsson, Carl F., 2013. "What did Frederick the great know about financial engineering? A survey of recent covered bond market developments and research," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 22-39.
    • Handle: RePEc:eee:ecofin:v:25:y:2013:i:c:p:22-39
    DOI: 10.1016/j.najef.2013.01.001
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    References listed on IDEAS

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    1. Frank Packer & Ryan Stever & Christian Upper, 2007. "The covered bond market," BIS Quarterly Review, Bank for International Settlements, September.
    2. Orazio Mastroeni, 2001. "Pfandbrief-style products in Europe," BIS Papers chapters, in: Bank for International Settlements (ed.), The changing shape of fixed income markets: a collection of studies by central bank economists, volume 5, pages 44-66, Bank for International Settlements.
    3. Mr. Renzo G Avesani & Ms. Elina Ribakova & Antonio I Garcia Pascual, 2007. "The Use of Mortgage Covered Bonds," IMF Working Papers 2007/020, International Monetary Fund.
    4. Bernanke Ben S., 2009. "The Future of Mortgage Finance in the United States," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(3), pages 1-10, March.
    5. Kenneth A. Snowden, 2010. "Covered Farm Mortgage Bonds in the Late Nineteenth Century U.S," NBER Working Papers 16242, National Bureau of Economic Research, Inc.
    6. Shehzad, Choudhry Tanveer & De Haan, Jakob, 2013. "Was the 2007 crisis really a global banking crisis?," The North American Journal of Economics and Finance, Elsevier, vol. 24(C), pages 113-124.
    7. Kempf, Alexander & Korn, Olaf & Uhrig-Homburg, Marliese, 2012. "The term structure of illiquidity premia," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1381-1391.
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    Cited by:

    1. Brzeszczyński, Janusz & Gajdka, Jerzy & Kutan, Ali M., 2015. "Investor response to public news, sentiment and institutional trading in emerging markets: A review," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 338-352.

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    More about this item

    Keywords

    Covered bond; Cover pool; Securitization product; Bond finance; Yield spread;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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