Securitization, Transparency and Liquidity

@inproceedings{Pagano2012SecuritizationTA,
  title={Securitization, Transparency and Liquidity},
  author={Marco Pagano and Paolo F. Volpin},
  year={2012}
}
We present a model in which issuers of structured bonds choose coarse and opaque ratings to enhance the liquidity of their primary market, at the cost of reducing secondary market liquidity or even causing it to freeze. The degree of transparency is inefficiently low if the social value of secondary market liquidity exceeds its private value. We analyze various types of public intervention — requiring transparency for rating agencies, providing liquidity to distressed banks or supporting… CONTINUE READING

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