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Asset securitization by non-financial firms: motivation and market valuationUnknown Date (has links)
This dissertation examines several research questions relating to securitization by non-financial firms. Finance theories suggest securitization is most beneficial when there is high demand for liquidity. On the other hand, empirical studies have shown that firms engage in securitization to manage earnings. I find that liquidity demand, not the incentive for earnings management motivates securitization transactions by non-financial firms. I also evaluate whether earnings management in securitization is indeed undesirable from a shareholder's perspective by examining the economic consequences of the practice. Because securitization creates a large infusion of cash, one way to evaluate the economic consequences of earnings management is to examine whether securitization proceeds encourage overinvestment. I find that earnings management in securitization (i.e., recording non-zero securitization income) is unrelated to firms' suboptimal) overinvestment in the post-securitization period. Thus, it appears that earning management in securitization has no negative economic consequence in terms of generating excess securitization proceeds that encourage overinvestment. I also examine the market's valuation of securitizable assets in the accrual components of earnings and the use of securitization proceeds. Because securitizable assets can be converted into cash through securitization, I test whether the market valuation reflects the source of liquidity in securitizable assets that is similar to the cash component of earnings. I find that, for securitization firms, the market valuation of securitizable assets is similar to that of the cash component of earnings. / Lastly, I find some evidence supporting the assertion that firms' liquidity prior to securitization influences the market valuation on securitization proceeds retained on the balance sheet, in that the market assigns a discount to retained proceeds for firms with excess liquidity prior to securitiaztion. / by Qianyun Huang. / Thesis (Ph.D.)--Florida Atlantic University, 2011. / Includes bibliography. / Electronic reproduction. Boca Raton, Fla., 2011. Mode of access: World Wide Web.
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Development and structuring of commercial mortgage-backed securities in AustraliaChikolwa, Bwembya C January 2008 (has links)
According to the Reserve Bank of Australia (2006) the increased supply of Commercial Mortgage-Backed Securities (CMBS), with a range of subordination, has broadened the investor base in real estate debt markets and reduced the commercial property sector’s dependence on bank financing The CMBS market has been one of the most dynamic and fastest-growing sectors in the capital markets, for a market which was virtually nonexistent prior to 1990. The global CMBS market issuance which stood at AU$5.1 billion (US$4 billion) in 1990 had grown to AU$380 billion (US$299 billion) by the end of 2006. In Australia, a total of over 60 CMBSs with nearly 180 tranches totalling over AU$17.4 billion had been issued to December 2006 from when they were first introduced in 1999. To date few studies have been done on Australian CMBSs outside the credit rating agency circles. These studies are predominantly practitioner focused (Jones Lang LaSalle 2001; Richardson 2003; Roche 2000, 2002). O’Sullivan (1998) and Simonovski (2003) are the only academic studies on CMBSs. As such, this thesis examines issues relating to the development of Australian CMBSs and quantitatively and qualitatively analyses the structuring of Australian CMBSs. In assessing the growth of the Australian CMBS market, an interpretive historical approach (Baumgarter & Hensley 2005) is adopted to provide a cogent review and explanation of features of international and Australian CMBSs. This helps to understand the changing nature of the market and provides better understanding of the present and suggests possible future directions. The Australian CMBS market is matured in comparison with the larger US and EU CMBS markets as seen by the diversity of asset classes backing the issues and transaction types, tightening spreads, and record issuance volumes. / High property market transparency (Jones Lang LaSalle 2006b) and predominance of Listed Property Trusts (LPT) as CMBS issuers (Standard & Poor’s 2005b), who legally have to report their activities and underlying collateral performance to regulatory regimes such as Australian Stock Exchange (ASX)/Australian Securities and Investment Commission (ASIC) and their equity partners, have contributed to the success of the Australian CMBS market. Furthermore, the positive commercial real estate market outlook should support future CMBS issuance, with LPTs continuing their dominance as issuers. In investigating property risk assessment in Australian CMBSs, all the CMBSs issued over a six year period of 2000 to 2005 were obtained from Standard and Poor’s presale reports as found in their Ratings Direct database to identify and review how property risk factors were addressed in all issues and within specific property asset classes following the delineation of property risk by Adair and Hutchinson (2005). Adequate assessment of property risk and its reporting is critical to the success of CMBS issues. The proposed framework shows that assessing and reporting property risk in Australian CMBSs, which are primarily backed by direct property assets, under the headings of investment quality risk, covenant strength risk, and depreciation and obsolescence risk can easily be done. The proposed framework should prove useful to rating agencies, bond issuers and institutional investors. Rating agencies can adopt a more systematic and consistent approach towards reporting of assessed property risk in CMBSs. Issuers and institutional investors can examine the perceived consistency and appropriateness of the rating assigned to a CMBS issue by providing inferences concerning property risk assessment. / The ultimate goal of structuring CMBS transactions is to obtain a high credit rating as this has an impact on the yield obtainable and the success of the issue. The credit rating process involves highly subjective assessment of both qualitative and quantitative factors of a particular company as well as pertinent industry level or market level variables (Huang et al. 2004), with the final rating assigned by a credit committee via voting (Kwon et al. 1997). As such, credit rating agencies state that researchers cannot replicate their ratings quantitatively since their ratings reflect each agency’s opinion about an issue’s potential default risk and relies heavily on a committee’s analysis of the issuer’s ability and willingness to repay its debt. However, researchers have replicated bond ratings on the premise that financial ratios contain a large amount of information about a company’s credit risk. In this study, quantitative analysis of determinants of CMBS credit ratings issued by Standard and Poor’s from 2000 – 2006 using ANNs and OR and qualitative analysis of factors considered necessary to obtain a high credit rating and pricing issues necessary for the success of an issue through mail surveys of arrangers and issuers are undertaken. Of the quantitative variables propagated by credit rating agencies as being important to CMBS rating, only loan-to-value ratio (LTV) is found to be statistically significant, with the other variables being statistically insignificant using OR. This leads to the conclusion that statistical approaches used in corporate bond rating studies have limited replication capabilities in CMBS rating and that the endogeneity arguments raise significant questions about LTV and debt service coverage ratio (DSCR) as convenient, short-cut measures of CMBS default risk. / However, ANNs do offer promising predictive results and can be used to facilitate implementation of survey-based CMBS rating systems. This should contribute to making the CMBS rating methodology become more explicit which is advantageous in that both CMBS investors and issuers are provided with greater information and faith in the investment. ANN results show that 62.0% of CMBS rating is attributable to LTV (38.2%) and DSCR (23.6%); supporting earlier studies which have listed the two as being the most important variables in CMBS rating. The other variables’ contributions are: CMBS issue size (10.1%), CMBS tenure (6.7%), geographical diversity (13.5%) and property diversity (7.9%) respectively. The methodology used to obtain these results is validated when applied to predict LPT bond ratings. Both OR and ANN produce provide robust alternatives to rating LPT bonds, with no significant differences in results between the full models of the two methods. Qualitative analysis of surveys on arrangers and issuers provides insights into structuring issues they consider necessary to obtain a high credit rating and pricing issues necessary for the success of an issue. Rating of issues was found to be the main reason why investors invest in CMBSs and provision of funds at attractive rates as the main motivation behind CMBS issuance. Furthermore, asset quality was found to be the most important factor necessary to obtain a high credit rating supporting the view by Henderson and ING Barings (1997) that assets backing securitisation are its fundamental credit strength. / In addition, analyses of the surveys reveal the following: • The choice of which debt funding option to use depends on market conditions. • Credit tranching, over-collateralisation and cross-collateralisation are the main forms of credit enhancement in use. • On average, the AAA note tranche needs to be above AU$100 million and have 60 - 85% subordination for the CMBS issue to be economically viable. • Structuring costs range between 0.1% – 1% of issue size and structuring duration ranges from 4 – 9 months. • Preferred refinancing options are further capital market issues and bank debt. • Pricing CMBSs is greatly influenced by factors in the broader capital markets. For instance, the market had literary shut down as a result of the “credit crunch” caused by the meltdown in the US sub-prime mortgage market. These findings can be useful to issuers as a guide on the cost of going to the bond market to raise capital, which can be useful in comparing with other sources of funds. The findings of this thesis address crucial research priorities of the property industry as CMBSs are seen as a major commercial real estate debt instrument. By looking at how property risk can be assessed and reported in a more systematic way, and investigating quantitative and qualitative factors considered in structuring CMBSs, investor confidence can be increased through the increased body of knowledge. Several published refereed journal articles in Appendix C further validate the stature and significance of this thesis. It is evident that the property research in this thesis can lead aid in the revitalisation of the Australian CMBS market after the “shut down” caused by the melt-down in the US sub-prime mortgage market and can also be used to set up property-backed CMBSs in emerging countries where the CMBS market is immature or non-existent.
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The Valuation of Mortgage-Backed Securitization¢wThe Application of Leveling Method for Transmiting Between NodesChung, Wei-Cheng 01 July 2002 (has links)
none
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Impacts of Volatility Spillovers, Economic Volatility and Capital Inflows on Mortgage-backed Financial MarketsTilahun, Ayanou Z. 01 December 2009 (has links)
The first essay explores the dynamic behaviors of mortgage-backed stock returns and their volatility spillovers within the framework of time-varying symmetric, asymmetric and multivariate GARCH-family models. The focus of the chapter is on the dynamics of volatility of the U.S. real estate investment trusts (REITs) and volatility spillovers within the REITs subdivisions as well as between the REITs and the Fannie Mae (FNM) and theFreddie Mac (FRE) mortgage-backed stocks. We analyze risk-return linkages using the GARCH-in-mean (GARCH-M) model. The presence of asymmetric effects of "bad" news and "good" news on conditional financial volatilities is evaluated using the Threshold ARCH (TARCH) model and the exponential GARCH (EGARCH) model. Volatility spillovers and comovements within REITs subdivisions; REITs with FNM and FRE and other selected financial assets are examined using the multivariate GARCH (MGARCH) model. The second essay investigates factors behind the existence of time-varying conditional volatilities of mortgage-backed securities (MBS). This is done by analyzing the impacts of economic volatilities on mortgage-backed financial markets' performance. The relationship between conditional volatilities of the MBS and conditional volatilities of the key economic fundamentals in the housing sector and the macroeconomy are explored. The sensitivity of mortgage-backed stocks to the underlying time-series changes in economic fundamentals, and the extent to which economic volatilities explain the variation in mortgage-backed stocks' volatilities are investigated. Particularly, we examined whether changes in the REITs, FNM and FRE volatilities are linked to and driven by time-varying volatilities of the housing sector economic activity and set of key macroeconomic variables. Thus, the chapter analyzes the impacts of conditional economic volatilities on the conditional volatilities of the REITs, FRE and FNM stocks. The GARCH (p, q) process is used to find conditional volatility dynamics for the economic variables in the study. Then we employ multivariate GARCH (p, q) model to investigate the spillovers and comovements among the conditional economic fundamentals' volatilities and the conditional volatilities of the MBS. The third essay explores the impacts of foreign sector of the economy on the mortgage-backed financial markets and the housing sector. There is large surge of foreign capital flows to the U.S, particularly since late 1990s. The net foreign holdings of U.S. financial assets have become very significant in the U.S. Treasury notes and bonds. Foreign investors also hold a growing share of securities of the U.S. agencies and government sponsored enterprises (GSEs). Similarly, foreign direct investment in the U.S. real estate as well as real estate equities in the form of REITs has grown sharply. To this end, a multivariate vector autoregression (VAR) model is the main tool of analysis. Based on the VAR model, generalized impulse response functions and generalized variance decompositions are employed to evaluate the responses of mortgage interest rates and Treasury yields to the changes in net foreign ownership of U.S. Treasuries and agency bonds.
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Příčiny a důsledky hypoteční krize v USA / The causes and consequences of the mortgage crisis in the USAVondál, Tomáš January 2008 (has links)
The main objects of this diploma thesis are basic trends in the mortgage market in the United States and their role in the current mortgage crisis. As a theoretical background in the first part of this work are mentioned asymetric information with the optimal consumer choice regarding mortgage product and the general theory of the securitization. Practical part continues from the description of the main characteristics of the mortgage to the whole mortgage market and the role of government agencies. Following analysis is concerning the significant tendencies in the past years, which dominates in the mortgage market in the USA. The focus is mainly aimed at the growth of alternative mortgage products in connection with strong home price apreciation. Then the position of mortgage brokers and their role in the subprime sector are discusssed. Subprime sector is analysed as well and then the securitization of mortgages as the main trend in the past years is investigated. The development of the current crisis is the object of the last chapter.
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Asset-backed securitisation in the USA and the role players : a practical application with commercial property in the South African contextVenter, Martin 12 1900 (has links)
Thesis (MBA)--Stellenbosch University, 2002. / ENGLISH ABSTRACT: Owners of directly held, large commercial properties mostly face problems
regarding liquidity and sometimes higher-risk exposure due to large properties
dominating their property portfolio.
• Exit vehicles in the listed property sector on the JSE are gaining momentum but
are, however, still facing the negative impact of overall bear market conditions.
• An exit vehicle in the bond market can serve as an alternative, where a Limited
Purpose Company/Special Purpose Vehicle (SPV) acquires a rental income stream
from a portfolio of properties and issues bonds. The funds raised from bond
investors, who focus on the credit rating of the income stream and not the
properties, are then used to acquire the property assets.
• Current market conditions, favour an asset-backed securitisation of property
leases. Low interest rates and other factors in the current market, as discussed in
this document, ensure lower costs of debt and easier access to capital when funds
are raised on the bond market, relative to the equity markets, with highly geared
structures not necessarily causing a negative impact on the credit rating (80% -
90% gearing possible with A - AA local credit rating).
• Usually a promoter, a Merchant Bank and a few institutions/ pension funds are
involved. Example: Institution X will be requested to take up an equity stake in
the fund by selling some properties or stakes therein (Institution X buildings) and
receiving payment in a combination of cash, junior bonds and equity. The benefits
to Institution X are discussed on page 39. / AFRIKAANSE OPSOMMING: Eienaars van groot kommersiële eiendomme wat direk besit word, ondervind
normaalweg probleme rakende likiditeit en verhoogde risiko a.g.v. die groot
eiendomme wat hulle portefeulje domineer.
• JEB (Johannesburgse Aandelebeurs) genoteerde maatskappye, as uitgangstrategie
vir die verkoop van eiendom, is 'n oplossing, maar beer mark
toestande verlaag die moontlikheid.
• 'n Maatskappy genoteer op BESA (Effektemark) kan as uitgang- strategie
dien, waar die voormelde maatskappy met beperkte aanspreeklikheid die
huurinkomstestroom van 'n portefeulje van eiendom aankoop en effekte uitgee
vir die finansiering van die transaksie. Die beleggers wie die effekte koop,
fokus op die kredietgradering van die effekte en nie die eiendom as
onderliggende bate nie.
• Huidige mark omstandighede verbeter die moontlikheid van 'n bategesekureerde
sekuritusasie van eiendomshuurkontrakte. Lae rentekoerse en
ander faktore wat in hierdie dokument bespreek word, verseker laer koste van
kapitaal en makliker toegang tot fondse relatief tot die aandelemarkte. Hoë
hefboom-finansiering is moontlik sonder te groot impak op die
kredietgradering. (A-AA kredietgradering moontlik met 80%-90% skuld)
• Normaalweg is 'n promoter, 'n beleggingsbank en 'n paar institusies/
pensioenfondse betrokke. Bv. Institusie X word versoek om aandeelhouding
op te neem in 'n maatskappy deur eiendomme te verkoop aan die voormelde
maatskappy en betaling te ontvang in die vorm van 'n kombinasie van kontant,
junior effekte en aandele. Die voordele vir Institusie X word bepreek op bl. 39
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Hong Kong investors' experience with structured financial products: financial literacy, learning, and socialnetworksZhang, Miao, 张苗 January 2010 (has links)
published_or_final_version / Economics and Finance / Master / Master of Philosophy
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A case study of South African commercial mortgage backed securitisationKaroly, Viola 30 November 2006 (has links)
Commercial mortgage-backed securitisation (CMBS) is an important development in the South African property finance field. This study explains the characteristics; structure and structuring; advantages, disadvantages and risks; and legal and regulatory aspects of CMBS. Four CMBS programmes have been launched in South Africa to date (August 2006) all of which have been originated by listed Property Loan Stock (PLS) companies. The unique features of the four programmes were examined and the impact on their originators and the listed property sector was analysed. The main participants in the South African CMBS industry were interviewed. CMBS has acted as a catalyst for greater competition between banks resulting in lower interest rates on bank debt and the creation of new property financing products. The introduction of CMBS has benefited not only the four originating PLS companies, but also had a positive impact on the entire listed property sector. / Business Management / M. Com. (Business Management)
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A case study of South African commercial mortgage backed securitisationKaroly, Viola 30 November 2006 (has links)
Commercial mortgage-backed securitisation (CMBS) is an important development in the South African property finance field. This study explains the characteristics; structure and structuring; advantages, disadvantages and risks; and legal and regulatory aspects of CMBS. Four CMBS programmes have been launched in South Africa to date (August 2006) all of which have been originated by listed Property Loan Stock (PLS) companies. The unique features of the four programmes were examined and the impact on their originators and the listed property sector was analysed. The main participants in the South African CMBS industry were interviewed. CMBS has acted as a catalyst for greater competition between banks resulting in lower interest rates on bank debt and the creation of new property financing products. The introduction of CMBS has benefited not only the four originating PLS companies, but also had a positive impact on the entire listed property sector. / Business Management / M. Com. (Business Management)
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A guide to asset securitisation in South AfricaOlivier, Albert 12 1900 (has links)
Thesis (MBA)--Stellenbosch University, 2002. / Some digitised pages may appear illegible due to the condition of the original hard copy / ENGLISH ABSTRACT: Enormous growth has been experienced in the South African securitisation
environment due to the lack of Government bond issues. There is little doubt that
securitisation is still in its early stages in South Africa, but it is here to stay. Asset
securitisation can be described as the process of pooling and repackaging non
tradable assets secured by relatively uniform, small value assets into liquid securities.
The original form of asset securitisation is mortgage backed securities. The success
achieved in the securitisation of mortgage loans globally resulted in the securitisation
of other types of asset backed securities. Auto loans, credit card receivables and
synthetic securitisation have attracted substantial interest in South Africa in the
recent past. Synthetic securitisation is becoming an increasingly important topic
following the focus of financial institutions to manage regulatory and risk capital.
Each securitisation transaction can be structured in such a way to demonstrate
specific cash flow characteristics, risk profiles or average life parameters.
Securitisation structures include several entities, with each playing a distinct role.
The originator is the entity which creates the underlying asset pool. The asset pool is
then sold to a SPV, which is a bankruptcy remote vehicle through which the
securitisation transaction is facilitated. The SPV will sell securities backed by the
asset pool to investors. The proceeds of the issue are used to finance the purchase
of the asset pool from the originator. The SPV appoints a servicer that administers
the asset pool on behalf of the issuer in return for a fee.
The South African legal and tax environment is currently undergoing a transformation
in order to accommodate the growing interest in securitisation. Precedents regarding
the taxation of securitisation structures are still lacking in South Africa. Both legal
and taxation issues around securitisation transactions are likely to change over the
coming years.
The South African securitisation market still needs to be improved significantly ahead
of being classified as world class. The lack of familiarity among investors involved in securitisation is keeping the market from growing to its full potential. Investor
education and the documentation of deal information are crucial. The growth of
securitisation issues is necessary to increase volumes and in turn enhance liquidity.
Knowledge, volumes and regulations regarding securitisation are certainly lacking in
South Africa, and though this may slow growth, it will most definitely not prevent the
business from rapidly expanding. / AFRIKAANSE OPSOMMING: Die tekort aan staatseffekte in Suid Afrika is een van die redes wat gelei het tot die
groei van die Suid Afrikaanse bate effekte mark. Alhoewel bate effektering nog 'n
nuwe konsep in Suid Afrika is, het die finansiele markte in Suid Afrika effektering
aanvaar en groot belangstelling word getoon deur beide finansiele instellings en
beleggers. Bate effektering kan beskryf word as die proses waar onverhandelbare
bates saam gegroepeer word en omskep word in likiede sekuriteite wat in die ope
mark verhandel kan word.
Bate effektering het sy oorsprong in die Verenigde State van Amerika gehad, waar
verbandlenings ge-effekteer is. Groot suksesse is behaal en ander vorme van bates
is vinnig ge-effekteer en aan die mark gebied. In Suid Afrika is verskillende vorme
van effektering al aangetref, die nuutste en mees opwindenste is egter sintetiese
effektering.
Effektering sluit verskillende entiteite in, en elkeen speel 'n baie spesifieke rol.
Kortliks is die proses soos hierna beskryf. Die bates word deur die oorspronklike
eienaar aan 'n spesiale doel voertuig verkoop. Die spesiale doel voertuig is
heeltemal onafhanklik van ander eenhede in die effekteringsstruktuur en finansiele
probleme in die struktuur het geen effek op die kredietwaardigheid van die spesiale
doel voertuig nie. Die spesiale doel voetuig verkoop effekte aan beleggers, en die
inkomste ontvang van beleggers befonds die aankoop van die poel bates van die
oorspronklike eienaar. Die spesiale doel voertuig word gediens en onderhou deur 'n
diens verskaffer in ruil vir 'n kontraktuele vergoeding.
Die Suid Akrikaanse finansiële markte is tans besig om 'n transformasie proses te
ondergaan om effektering te akkomodeer, die fokus is veral op wetlike en belasting
aspekte. Alhoewel baie veranderinge al plaasgevind het, sal daar nog baie gedoen
moet word voor die Suid Afrikaanse mark as wereld-klas geklassifiseer kan word.
Ongelukkig is beleggers nog onbekend met effektering en daarom weerhou dit die
mark van vinnige ontwikkeling.
Kortom, kennis, volumes en duideliker regulasies wat betrekking het op effektering is
definitief nodig in Suid Afrika, en alhoewel dit groei verstadig, sal dit definitief nie die
nuwe finansiële instrument keer om tot een van Suid Afrika se vooraanstaande
finansiële instrumente te ontwikkel nie.
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