Multi-tranche securitisation structures: more than just a zero-sum game?

• Published in: The European journal of finance Vol. 25; no. 2; pp. 167 - 189
• Main Authors: Peña-Cerezo, Miguel Á., Rodríguez-Castellanos, Arturo, Ibáñez-Hernández, Francisco J.
• Format: Journal Article
• Language: English
• Published: London Routledge 01-01-2019; Taylor & Francis LLC
• Subjects: Asymmetric information; Bond issues; Economic crisis; First time; Great Financial Crisis; Markets; primary yield; Securitisation; Securitization; tranche; Zero sum games
• ISSN: 1351-847X; 1466-4364
• DOI: 10.1080/1351847X.2018.1505648

This paper explains multi-tranche structuring and the yield that securitisation bonds offer by incorporating several factors into a comprehensive model. Results indicate that the degree of complexity of multi-tranche securitisation structures is related to market completeness and solving information asymmetry problems. We also find that the complexity of multi-tranche structure enables the yield offered by triple-A bonds to be reduced but not the average yield, concluding that tranching is a zero-sum game. This research uses a database comprising of all the MBS and ABS issues (1993-2011) in Spain, one of the world's main securitisation markets. Analysing this long period has allowed us, for the first time, to contrast the Great Financial Crisis (GFC) disruptive effect on the analysed relationships in the securitisation market.