Edinburgh Research Explorer

Portfolio Sales and Signaling

Research output: Working paper

Original languageEnglish
Number of pages36
Publication statusPublished - Feb 2017

Abstract

A common practice of banks has been to pool assets of different qualities and then sell a fraction of the newly created portfolios to investors. We extend the signalling model for single sales of risky assets to portfolio sales. We identify conditions under which signalling at the portfolio level dominates signalling at the single asset level. In particular, when banks have better information about loan types on their books, and some commitment power to sales, can profit by pooling assets whilst retaining a skin in the game.

    Research areas

  • securitization, skin in the game, signaling, tranching

ID: 33912870