Abstract: This paper studies the optimality of pooling and tranching for a privately informed security originator facing buyers endowed with market power (perhaps due to liquidity shortages). Contrary to the standard result that pooling and tranching are optimal practices, we find that selling assets separately may be preferred by originators as it weakens buyers' incentives to inefficiently screen them. Our results can shed light on observed time-variation in the practice of pooling and tranching in financial markets, in particular, the dramatic decline in the size of the ABS market following the most recent financial crisis.
Teaching Assistant, The Wharton School, University of Pennsylvania
Corporate Finance (FNCE 611, Executive MBA), Prof. Itay Goldstein, 2016-2019
Advanced Corporate Finance (FNCE 726/203, MBA, UG), Prof. Christian Opp, 2016-2018
Risk Management (BEPP 805/305, MBA, UG), Prof. Olivia S. Mitchell and Prof. Neil A. Doherty, 2016-2017.
Teaching Assistant, Lomonosov Moscow State University