Advances in Economics, Management and Political Sciences

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Proceedings of the 2nd International Conference on Business and Policy Studies

Series Vol. 9 , 13 September 2023


Open Access | Article

Securitization: The “curse” of the Financial System during the 2008 Crisis

Runyang Ran * 1 , Zizhou Niu 2 , Zixuan Zhang 3 , Yutong Zhang 4
1 University of Toronto (Mississauga Campus)
2 University of Toronto (Mississauga Campus)
3 University of Toronto (Mississauga Campus)
4 University of Toronto (Mississauga Campus)

* Author to whom correspondence should be addressed.

Advances in Economics, Management and Political Sciences, Vol. 9, 38-56
Published 13 September 2023. © 13 September 2023 The Author(s). Published by EWA Publishing
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Citation Runyang Ran, Zizhou Niu, Zixuan Zhang, Yutong Zhang. Securitization: The “curse” of the Financial System during the 2008 Crisis. AEMPS (2023) Vol. 9: 38-56. DOI: 10.54254/2754-1169/9/20230347.

Abstract

During the 2008 financial crisis, many investment and commercial banks were hit hard. The primary reasons that caused the financial crisis were the abuse of mortgage securitization and the housing bubble. In this paper, our group mainly focused on the potential issue of the mortgage securitization structure and the impact that the abuse of securitization caused. Our group analyzed the correlation between mortgage defaults through the OLS linear regression model. It showed an underestimation of the possibility of defaulting on securitization products (MBS, CDO, etc.). Furthermore, our group analyzed the expansion of this potential risk due to the raised housing bubble. After analyzing the potential risk, our group analyzed the impacts that the securitization caused in macro and micro views. First, our group analyzed vital factors that affect bank performance using the OLS linear regression model. Moreover, based on the change of these critical factors caused by the exposed potential risk from the securitization structure, our group analyzed the bank’s performance during the financial crisis. Second, our group analyzed the macro impacts before, during, and after the financial crisis due to the abuse of securitization. Overall, according to the potential risk in the securitization structure and the macro and micro impacts caused by the exposed potential risk, our group concluded that the abuse of securitization was the “curse” for the whole financial system at that time.

Keywords

the abuse of securitization, securitization structure, financial crisis

References

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Data Availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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Volume Title
Proceedings of the 2nd International Conference on Business and Policy Studies
ISBN (Print)
978-1-915371-45-4
ISBN (Online)
978-1-915371-46-1
Published Date
13 September 2023
Series
Advances in Economics, Management and Political Sciences
ISSN (Print)
2754-1169
ISSN (Online)
2754-1177
DOI
10.54254/2754-1169/9/20230347
Copyright
13 September 2023
Open Access
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited

Copyright © 2023 EWA Publishing. Unless Otherwise Stated