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Liquidity Creation through Banks and Markets: A Theoretical Perspective on Securitization
Author(s) -
Von Thadden ErnstLudwig
Publication year - 2000
Publication title -
economic notes
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.274
H-Index - 19
eISSN - 1468-0300
pISSN - 0391-5026
DOI - 10.1111/1468-0300.00038
Subject(s) - securitization , market liquidity , asset (computer security) , business , financial system , process (computing) , perspective (graphical) , financial market , economics , monetary economics , finance , computer security , artificial intelligence , computer science , operating system
Securitization is a process that transforms some traditional non‐traded banking assets into marketable securities. To evaluate this process, this paper surveys theories of the intertemporal allocation of funds through demand deposits and anonymous markets, first separately and then in an integrated model. It reviews some work on the role of market frictions and asset characteristics, and concludes that the interplay between these two is crucial in explaining the observed co‐existence of demand deposits and anonymous markets. This suggests that securitization is an opportunity, rather than a threat, to banks. (J.E.L.: D50, G21)