Graduate Research and Discovery Symposium (GRADS)

Securitization, Credit Derivatives and Bank Failure

Advisor

Howard Bodenhorn

Document Type

Poster

Department

Economics

Publication Date

Spring 2013

Abstract

During America’s most recent recession, more than 281 banks failed between 2006-2010, roughly 1,200% more failures than the previous five years. In April 2011, asset-backed securities grew to a high of $11 trillion more than the outstanding value of all U.S. Treasuries combined. My research explores to what extent insurance on asset-backed securities, called credit derivative swaps, led to bank failure. I also explore the determinants leading to bank securitization. Early research indicates that the stock market was able to avoid the pitfalls of asymmetric information when analyzing off-balance sheet items.

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