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How to Measure Securitization: A Structural Equation Approach

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  • van der Plaat, Mark T.

Abstract

Securitization is a popular concept in banking and finance. Empirical literature measures securitization with a wide range of variables, which raises the question how to measure securitization. Using a structural equation modeling approach, we examine whether proxy variables used in the literature have a common securitization factor. We find that there are two common factors for ABS-CDO securitization, and ABCP securitization. These factors correlate strongly with factors for loan sales and credit derivatives, indicating that these four factors together are used by banks to hedge credit risk. We present some recommendations to improve the measurement of securitization.

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  • van der Plaat, Mark T., 2021. "How to Measure Securitization: A Structural Equation Approach," MPRA Paper 109735, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:109735
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    More about this item

    Keywords

    Securitization; Asset-Backed Securities; Collateralized Debt Obligations; Asset-Backed Commercial Papers; Loan Sales; Credit Derivatives; Credit Default Swaps; Latent Variables; Proxy Variables; Latent Variable Analysis; Structural Equation Modeling; Exploratory Factor Analysis; Confirmatory Factor Analysis;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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