securities produced by structured finance activities have far less chance of surviving a severe economic downturn than traditional corporate securities of equal 3 rating
ooling of economic assets (e.g. loans, bonds, mortgages) and subsequent issuance of a prioritized capital structure of claims, known as tranches, against these collateral pools.
A second, equally neglected feature of the securitization process is that it substitutes risks that are largely diversifiable for risks that are highly systematic
modest imprecision in the parameter estimates can lead to variation in the default risk of the structured finance securities which is sufficien
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