Securitization of Receivables - An Analysis of the Inherent Risks
Securitization is a modality of structured finance which allows a company to raise funds based on its receivables through capital markets. In Brazil, securitization was developed mostly in the form of mutual funds - the FIDC, which raise money by issuing senior cotes for qualified investors, and sub...
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| Format: | Article |
| Language: | English |
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Brazilian Society of Finance
2009-06-01
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| Series: | Revista Brasileira de Finanças |
| Subjects: | |
| Online Access: | http://virtualbib.fgv.br/ojs/index.php/rbfin/article/view/1353 |
| _version_ | 1811317601815494656 |
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| author | José Roberto Ferreira Savoia Fernando Antonio Perrone Pinheiro |
| author_facet | José Roberto Ferreira Savoia Fernando Antonio Perrone Pinheiro |
| author_sort | José Roberto Ferreira Savoia |
| collection | DOAJ |
| description | Securitization is a modality of structured finance which allows a company to raise funds based on its receivables through capital markets. In Brazil, securitization was developed mostly in the form of mutual funds - the FIDC, which raise money by issuing senior cotes for qualified investors, and subordinated cotes, usually bought by the company that originated the receivables. This paper evaluates the risk and return for both kinds of investors through a stochastic model with two main variables: interest rates and default rates. The model is still sensible to the characteristics of the fund, like the amount of subordinated cotes, the type of asset being securitized; and the amount of receivables in relation to the assets. Regarding the case of senior cotes, the risk of returns under the basic level of interest rates is highly improbable; and in the case of subordinated cotes, the risk of returns under the basic interest rate may be considered still low, due to the high spreads observed in the Brazilian financial market. The simulations indicated that under historically mean interest rate volatility the default rates are the main component of the total risk. Accordingly to the developed analysis of international standards of regulation, the Brazilian Central Bank imposes very strong capital requirements to banks that securitize their assets and purchase the corresponding subordinated cotes. |
| first_indexed | 2024-04-13T12:11:07Z |
| format | Article |
| id | doaj.art-db00fe7d25d64b40b84e67b1442b2bd1 |
| institution | Directory Open Access Journal |
| issn | 1679-0731 1984-5146 |
| language | English |
| last_indexed | 2024-04-13T12:11:07Z |
| publishDate | 2009-06-01 |
| publisher | Brazilian Society of Finance |
| record_format | Article |
| series | Revista Brasileira de Finanças |
| spelling | doaj.art-db00fe7d25d64b40b84e67b1442b2bd12022-12-22T02:47:29ZengBrazilian Society of FinanceRevista Brasileira de Finanças1679-07311984-51462009-06-0173305326Securitization of Receivables - An Analysis of the Inherent RisksJosé Roberto Ferreira SavoiaFernando Antonio Perrone PinheiroSecuritization is a modality of structured finance which allows a company to raise funds based on its receivables through capital markets. In Brazil, securitization was developed mostly in the form of mutual funds - the FIDC, which raise money by issuing senior cotes for qualified investors, and subordinated cotes, usually bought by the company that originated the receivables. This paper evaluates the risk and return for both kinds of investors through a stochastic model with two main variables: interest rates and default rates. The model is still sensible to the characteristics of the fund, like the amount of subordinated cotes, the type of asset being securitized; and the amount of receivables in relation to the assets. Regarding the case of senior cotes, the risk of returns under the basic level of interest rates is highly improbable; and in the case of subordinated cotes, the risk of returns under the basic interest rate may be considered still low, due to the high spreads observed in the Brazilian financial market. The simulations indicated that under historically mean interest rate volatility the default rates are the main component of the total risk. Accordingly to the developed analysis of international standards of regulation, the Brazilian Central Bank imposes very strong capital requirements to banks that securitize their assets and purchase the corresponding subordinated cotes.http://virtualbib.fgv.br/ojs/index.php/rbfin/article/view/1353securitizationFIDCreceivablescredit riskstructured finance. |
| spellingShingle | José Roberto Ferreira Savoia Fernando Antonio Perrone Pinheiro Securitization of Receivables - An Analysis of the Inherent Risks Revista Brasileira de Finanças securitization FIDC receivables credit risk structured finance. |
| title | Securitization of Receivables - An Analysis of the Inherent Risks |
| title_full | Securitization of Receivables - An Analysis of the Inherent Risks |
| title_fullStr | Securitization of Receivables - An Analysis of the Inherent Risks |
| title_full_unstemmed | Securitization of Receivables - An Analysis of the Inherent Risks |
| title_short | Securitization of Receivables - An Analysis of the Inherent Risks |
| title_sort | securitization of receivables an analysis of the inherent risks |
| topic | securitization FIDC receivables credit risk structured finance. |
| url | http://virtualbib.fgv.br/ojs/index.php/rbfin/article/view/1353 |
| work_keys_str_mv | AT joserobertoferreirasavoia securitizationofreceivablesananalysisoftheinherentrisks AT fernandoantonioperronepinheiro securitizationofreceivablesananalysisoftheinherentrisks |