Process of securitization and the impact of new financial products on the occurance of the global financial crisis
Process of securitization and the impact of new financial products on the occurance of the global financial crisis

Summary/Abstract: One of the most conspicuous phenomena observed in recent financial markets is the development of new financial products. With rapid development in financial techniques and engineering, new financial products are being constantly developed and introduced into the financial markets. New financial products have both positive and negative effects on financial development. They induce financial innovation and accelerate the growth of financial markets; they can also be widely used as the tools for risk management. In addition, new financial products widen the source of financing, such as structured finance, to financial institutions. However, these products also have the potential to destabilize financial markets, especially when actively used as speculative investments. Since speculators take advantage of the leverage implicit in these products, investment failure may result in great losses that can affect entire financial markets, as seen in the recent sub-prime mortgage turmoil in the U.S.The major idea behind this study was to provide an overview of one of the most important new financial products, the securitization process, to understand the essence of the process, to identify its main features, as well as the relevant consequences of the process to the global financial system and to implement measures to minimize the impact of the current crisis and prevent recurrence.

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