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Title: Asset-Backed Securitization in Singapore: Value of Embedded Buy-Back Options
Authors: Sing, T.F. 
Ong, S.E. 
Sirmans, C.F.
Keywords: Asset-backed securitization
Buy-back option
Option premiums
Issue Date: 2003
Citation: Sing, T.F., Ong, S.E., Sirmans, C.F. (2003). Asset-Backed Securitization in Singapore: Value of Embedded Buy-Back Options. Journal of Real Estate Finance and Economics 27 (2) : 173-189. ScholarBank@NUS Repository.
Abstract: Asset backed securities have been promoted as an important financing instrument for property developers to raise capital in Singapore. In 1999 alone, S$1.92 billion worth of bonds have been issued via the securitization of six commercial properties and one residential condominium project under construction. Buy-back option is a unique feature embedded in the asset-backed securitization (ABS) in Singapore, which allow the originator to retain a contingent claim on the upside potential of the asset price. Based on the multi-period binomial option pricing framework proposed by Cox et al. (1979), the prices of the options embedded in the ABS contracts are estimated. Using the securitization of the 132,111 square feet 268 Orchard Road office building for illustration the premium of the options embedded in the 10-year ABS deal was estimated at S$28.47 million, or 15.48 percent of the bond value. Recognition of the value of embedded option is important for structuring a fair and transparent ABS deal.
Source Title: Journal of Real Estate Finance and Economics
ISSN: 08955638
DOI: 10.1023/A:1024724319928
Appears in Collections:Staff Publications

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