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    A note on the subprime mortgage crisis: dynamic modelling of bank leverage profit under loan securitization

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    Date
    2010
    Author
    Petersen, Mark Adam
    Mulaudzi, Mmboniseni Phanuel
    Mukuddem-Petersen, Janine
    Schoeman, Ilse
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    Abstract
    In this brief research article, we consider the financial modelling of the process of mortgage loan securitization that has been a root cause of the ongoing Subprime Mortgage Crisis (SMC). In particular, we suggest a Lévy process-driven model of bank leverage profit that arises from the securitization of a pool of subprime mortgage loans. To achieve this, we develop stochastic models for mortgage loans, mortgage loan losses, credit ratings and mortgage loan guarantees in a subprime context. These models incorporate some of the most important issues related to the SMC and its causes. Finally, we provide a brief analysis of the models developed earlier in our contribution and its relationship with the SMC
    URI
    http://hdl.handle.net/10394/3471
    http://dx.doi.org/10.1080/13504850903035907
    http://www.tandfonline.com/doi/full/10.1080/13504850903035907
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    • Faculty of Natural and Agricultural Sciences [4855]

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