search query: @author Riddiough, T. / total: 4
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Author: | Riddiough, T. |
Title: | Optimal design and governance of asset-backed securities |
Journal: | Journal of Financial Intermediation
1997 : APR, VOL. 6:2, p. 121-152 |
Index terms: | SECURITIES FINANCIAL INTERMEDIARIES GOVERNMENT |
Language: | eng |
Abstract: | A model of asymmetric asset value information and nonverifiability of liquidation motives is developed to examine the optimal design and governance of asset-backed securities. Because of adverse selection risk, the liquidation option of whole loan sale results in external price discounting of composite cash flows. The alternative liquidation option of senior/subordinated security design is shown to dominate whole loan sale, since cash flow splitting allows the issuer to internalize some or all of the lemons-related liquidation costs. |
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