Smallman, Joseph Dempster
(1993)
Securitization and the global market.
MPhil thesis, London School of Economics and Political Science.
Abstract
Securitization and the Global Market' presents a thorough investigation into the evolution of securitization and its adaptation to the international market. Additionally, we provide some insight into its future applications. Securitization is a relatively new form of financial intermediation, which allows the three functions of financing - origination, funding and servicing - to be separated and each placed with the most efficient provider. Since this method of financing promotes efficiency in the financial markets, it has shown remarkable growth in the United States, United Kingdom, Canada, France and Australia. The thesis explains how mortgage-backed securitization evolved in the United States and how this method of housing finance is being integrated into international markets. Additionally, we explain how securitization is used to fund receivables other than mongages. Because we address cross-currency transactions, we also discuss foreign exchange rate risk management by reviewing the history, development and application of financial products used in hedging various risks. Also a review of mortgage-prepayment modelling is presented, because prepayment creates the most uncertainty in the cash flow that is to be hedged. Using the evidence presented in this thesis, the final chapter argues for the creation of a multicurrency sterling collateralised mortgage obligation. This product can serve to aid the development of the global market via securitization-a proven method of financial intermediation.
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