The Choice of Optimal Risk Retention Forms from the Perspective of Asymmetric Information
The risk retention rule requires issuers to retain part of their securities and share the interests of investors. The different forms of risk retention chosen lead to different financing effects of enterprises. In order to explore the optimal choice of risk retention forms in different environments,...
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MDPI AG
2024-11-01
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| Series: | Mathematics |
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| _version_ | 1846153075105988608 |
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| author | Yong Zhang Jing Zhang |
| author_facet | Yong Zhang Jing Zhang |
| author_sort | Yong Zhang |
| collection | DOAJ |
| description | The risk retention rule requires issuers to retain part of their securities and share the interests of investors. The different forms of risk retention chosen lead to different financing effects of enterprises. In order to explore the optimal choice of risk retention forms in different environments, according to asset pricing theory and asset securitization practice combined with risk retention rules, we obtain issuer payoff models under three forms of risk retention. Through numerical simulation and economic meaning analysis, we draw the following conclusions: hybrid retention can not only alleviate the side effects of horizontal retention but also reduce the proportion of vertical retention, which can improve the issuer payoffs; horizontal retention is more suitable for situations where asset pool losses are small or asset volatility is large, while vertical retention is the opposite. Therefore, we suggest that securities issuers should consider the assets of enterprises and macroeconomic situations to choose the optimal form of risk retention. |
| format | Article |
| id | doaj-art-74406bcfe1f1448b83d27a95b21d9ab5 |
| institution | Kabale University |
| issn | 2227-7390 |
| language | English |
| publishDate | 2024-11-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Mathematics |
| spelling | doaj-art-74406bcfe1f1448b83d27a95b21d9ab52024-11-26T18:11:43ZengMDPI AGMathematics2227-73902024-11-011222352710.3390/math12223527The Choice of Optimal Risk Retention Forms from the Perspective of Asymmetric InformationYong Zhang0Jing Zhang1School of Mathematics and Statistics, Jishou University, Jishou 416000, ChinaYiyang Party School, Yiyang 413000, ChinaThe risk retention rule requires issuers to retain part of their securities and share the interests of investors. The different forms of risk retention chosen lead to different financing effects of enterprises. In order to explore the optimal choice of risk retention forms in different environments, according to asset pricing theory and asset securitization practice combined with risk retention rules, we obtain issuer payoff models under three forms of risk retention. Through numerical simulation and economic meaning analysis, we draw the following conclusions: hybrid retention can not only alleviate the side effects of horizontal retention but also reduce the proportion of vertical retention, which can improve the issuer payoffs; horizontal retention is more suitable for situations where asset pool losses are small or asset volatility is large, while vertical retention is the opposite. Therefore, we suggest that securities issuers should consider the assets of enterprises and macroeconomic situations to choose the optimal form of risk retention.https://www.mdpi.com/2227-7390/12/22/3527risk retention formasset securitizationfinancial contractingasymmetric information |
| spellingShingle | Yong Zhang Jing Zhang The Choice of Optimal Risk Retention Forms from the Perspective of Asymmetric Information Mathematics risk retention form asset securitization financial contracting asymmetric information |
| title | The Choice of Optimal Risk Retention Forms from the Perspective of Asymmetric Information |
| title_full | The Choice of Optimal Risk Retention Forms from the Perspective of Asymmetric Information |
| title_fullStr | The Choice of Optimal Risk Retention Forms from the Perspective of Asymmetric Information |
| title_full_unstemmed | The Choice of Optimal Risk Retention Forms from the Perspective of Asymmetric Information |
| title_short | The Choice of Optimal Risk Retention Forms from the Perspective of Asymmetric Information |
| title_sort | choice of optimal risk retention forms from the perspective of asymmetric information |
| topic | risk retention form asset securitization financial contracting asymmetric information |
| url | https://www.mdpi.com/2227-7390/12/22/3527 |
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