Costs of securitisation include:
A)costs of public/private credit risk insurance and guarantees
B)costs of over-collateralisation
C)valuation and packaging costs (the cost of asset heterogeneity)
D)All of the listed options are correct.

Question

Quizplus · Accepted Answer

All of the listed options are costs associated with securitisation. The costs of public/private credit risk insurance and guarantees are incurred to protect against default risk, while over-collateralisation is necessary to maintain the credit quality of the securitised assets. Valuation and packaging costs arise due to the complexity and heterogeneity of the assets being securitised.

Costs of Securitisation Include