Indeed, these instruments have allowed the separation of different types of risk, such as credit and market risk. This has promoted better risk-management practices, and has allowed different types of risk to be borne by those best able to do so. Securitization has encouraged innovation and enhanced the ability of the banking sector to originate new loans while remaining well capitalized.
The final point to make in terms of the causes of this summer's turbulence has to do with how these complex securities are valued. Trading of these securities in the secondary market is rare and, if trading does occur, it takes place in the over-the-counter market. As such, prices for these securities are not very transparent.