Subprime Risk and Insurance with Regret

Table 7

Effect of securitization on return on capital.

Presecuritization of 6500	Balances	Returns and costs (%)	Returns and costs
Mortgages	10000	0.102	1020
Deposits	9600	−0.101	−969.6
Equity capital	200		30
Subordinate debt	200	−0.101	−20.2
Return on capital			0.15
Mortgages	3500	0.102001292	357.0
Deposits	3360	−0.101	−339.36
Equity capital	70
Subordinate debt	70	−0.101	−7.07
Return on capital			0.20263
Mortgages	3500	0.102001292	357.0
Deposits	3360	−0.101	−339.36
Equity capital	190		29.9991
Subordinate debt	190	−0.101	−19.19
Return on capital			0.15789