Securitization, Credit Derivatives and Bank Failure

During America’s most recent recession, more than 281 banks failed between 2006-2010, roughly 1,200% more failures than the previous five years. In April 2011, asset-backed securities grew to a high of $11 trillion more than the outstanding value of all U.S. Treasuries combined. My research explores to what extent insurance on asset-backed securities, called credit derivative swaps, led to bank failure. I also explore the determinants leading to bank securitization. Early research indicates that the stock market was able to avoid the pitfalls of asymmetric information when analyzing off-balance sheet items