Handbook of the Economics of Finance SET:Volumes 2A & 2B

Chapter 1

Securitization^*

Gary Gorton^a and Andrew Metrick^b

^aFrederick Frank Class of 1954 Professor of Management and Finance

^bMichael H. Jordan Professor of Finance and Management Yale University School of Management, New Haven, CT, USA

Abstract

We survey the literature on securitization and lay out a research program for its open questions. Securitization is the process by which loans, previously held to maturity on the balance sheets of financial intermediaries, are sold in capital markets. Securitization has grown from a small amount in 1990 to a pre-crisis issuance amount that makes it one of the largest capital markets. In 2005 the amount of non-mortgage asset-backed securities issued in US capital markets exceeded the amount of US corporate ...