Transparency through Financial Claims with 'Fingerprints': A Mechanism for Preventing Financial Crises

14 Pages Posted: 13 Mar 2009 Last revised: 12 Oct 2009

See all articles by Helmut Gründl

Helmut Gründl

Goethe University Frankfurt - Department of Finance; International Center for Insurance Regulation

Thomas Post

Maastricht University - School of Business and Economics - Department of Finance; Netspar

Date Written: October 7, 2009

Abstract

Lack of transparency in securitization transactions contributed significantly to the severe financial crisis of 2007-2009. In this paper, based on a recent idea by Markowitz (2009), we propose an incentive-compatible mechanism for future securitization transactions that will increase transparency: financial claims with fingerprints. This mechanism allows market participants at each stage of the securitization process to easily obtain full information about the underlying original risks and the superior claims that need to be satisfied before receiving their own payoffs. The fingerprint mechanism would considerably enhance transparency in securitization transactions at the expense of some transaction costs.

Keywords: Financial Crisis, Securitization, Mortgage-Backed Securities, Transparency, Opaqueness

JEL Classification: D53, E44, F34, G14, G18, G21, G24, G28

Suggested Citation

Gründl, Helmut and Post, Thomas, Transparency through Financial Claims with 'Fingerprints': A Mechanism for Preventing Financial Crises (October 7, 2009). Financial Analysts Journal, Vol. 65, No. 5, 2009. Available at SSRN: https://ssrn.com/abstract=1358608

Helmut Gründl (Contact Author)

Goethe University Frankfurt - Department of Finance ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60323
Germany

HOME PAGE: http://https://www.wiwi.uni-frankfurt.de/en/departments/finance/home.html

International Center for Insurance Regulation ( email )

House of Finance
Campus Westend, Goethe University
Frankfurt am Main, D-60323
Germany

HOME PAGE: http://www.icir.de

Thomas Post

Maastricht University - School of Business and Economics - Department of Finance ( email )

Tongersestraat 53
Maastricht, 6200 MD
Netherlands
+31 43 38 83899 (Phone)
+31 43 38 84875 (Fax)

HOME PAGE: http://www.thomas-post.com

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.netspar.nl

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