Security issuance and investor information

Although the commoditisation of illiquid asset exposures through securitisation facilitates the disciplining effect of capital markets on the risk management, private information about securitised debt as well as complex
Although the commoditisation of illiquid asset exposures through securitisation facilitates the disciplining effect of capital markets on the risk management, private information about securitised debt as well as complex transaction structures could possibly impair the fair market valuation. In a simple issue design model without intermediaries we maximise issuer proceeds over a positive measure of issue quality, where a direct revelation mechanism (DRM) by profitable informed investors engages endogenous price discovery through auction-style allocation preference as a continuous function of perceived issue quality. We derive an optimal allocation schedule for maximum issuer payoffs under different pricing regimes if asymmetric information requires underpricing. In particular, we study how the incidence of uninformed investors at varying levels of valuation uncertainty and their function of clearing the market effects profitable informed investment. We find that the issuer optimises own payoffs at each valuation irrespective of the applicable pricing mechanism by awarding informed investors the lowest possible allocation (and attendant underpricing) that still guarantees profitable informed investment. Under uniform pricing the composition of the investor pool ensures that informed investors appropriate higher profit than uninformed types. Any reservation utility by issuers lowers the probability of information disclosure by informed investors and the scope of issuers to curtail profitable informed investment. JEL Classifications: D82, G12, G14, G23
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Metadaten
Author:Andreas A. Jobst
URN:urn:nbn:de:hebis:30-16351
Document Type:Report
Language:English
Date of Publication (online):2005/09/26
Year of first Publication:2005
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/09/26
Tag:asset securitisation; asset securitisation ; asymmetric information ; auction model ; direct revelation mechanism ; security design ; security issue
Pagenumber:44
HeBIS PPN:203858042
Institutes:Wirtschaftswissenschaften
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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