Portfolio Sales and Signaling

36 Pages Posted: 23 Mar 2017

See all articles by Spiros Bougheas

Spiros Bougheas

University of Nottingham - School of Economics

Tim S. Worrall

University of Edinburgh

Date Written: February 27, 2017


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 signaling model for single sales of risky assets to portfolio sales. We identify conditions under which signaling at the portfolio level dominates signaling 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.

Keywords: securitization, skin in the game, signaling, tranching

JEL Classification: D820, G210, G230

Suggested Citation

Bougheas, Spiros and Worrall, Tim S., Portfolio Sales and Signaling (February 27, 2017). CESifo Working Paper Series No. 6354, Available at SSRN: https://ssrn.com/abstract=2938989 or http://dx.doi.org/10.2139/ssrn.2938989

Spiros Bougheas (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Tim S. Worrall

University of Edinburgh ( email )

30 Buccleuch Place
Edinburgh, Scotland EH8 9JY
United Kingdom
(0)131 651 5128 (Phone)

HOME PAGE: http://www.timworrall.com

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