Mukuddem-Petersen, J.Petersen, Mark AdamSchoeman, I.M.Mulaudzi, M.P.2012-02-292012-02-292010Mukuddem-Petersen, J. et al. 2010. Optimal mortgage loan securitization and the subprime crisis. Optimization letters, 4(1):97-115. [https://doi.org/10.1007/s11590-009-0140-y]1862-44721862-4480 (Online)http://hdl.handle.net/10394/6112https://link.springer.com/article/10.1007%2Fs11590-009-0140-yhttps://doi.org/10.1007/s11590-009-0140-yWe analyze the process of mortgage loan securitization that has been a root cause of the current subprime mortgage crisis (SMC). In particular, we solve an optimal securitization problem for banks that has the cash outflow rate for financing a portfolio of mortgage-backed securities (MBSs) and the bank’s investment in MBSs as controls. In our case, the associated Hamilton–Jacobi–Bellman equation (HJBE) has a smooth solution when the optimal controls are computed via a power utility function. Finally, we analyze this optimization problem and its connections with the SMCTrue-sales mortgage loan securitizationCredit ratingsCredit default swapsProfitabilitySubprime mortgage crisis