The Market Structure of Securitisation and the US Housing Bubble
24 Pages Posted: 11 Oct 2014 Last revised: 8 May 2015
Date Written: October 9, 2014
Housing finance, and, specifically, the subprime private label securitisation market in the US, was at the epicentre of the global financial crisis. Excessive debt expansion in the run-up to the crisis resulted in credit risk, under-identified and mispriced ex ante, and in systemic risk. This paper considers the role of financial innovation in debt markets and the changing market structure of securitisation in the evolution of the US housing price bubble. New financing vehicles contributed to growing risk, but the more salient factor was the change in the structure of securitisation, which led to unsustainable levels of debt.
Keywords: mortgage securitisation, credit risk, housing bubble, housing finance
JEL Classification: E44, G01, G2, G28
Suggested Citation: Suggested Citation