LONDON--(BUSINESS WIRE)--Technavio analysts forecast the global collateralized debt obligation (CDO) market to grow at a CAGR of more than 5% during the forecast period, according to their latest report.
The research study covers the present scenario and growth prospects of the global collateralized debt obligation market for 2016-2020. To calculate the market size, the report considers the total outstanding collateralized debt obligation from the Americas, APAC, and EMEA. The report also presents the vendor landscape and a corresponding detailed analysis of the vendors operating in the market.
Technavio analysts highlight the following three factors that are contributing to the growth of the global collateralized debt obligation market:
- Dynamic market structure
- Growth in integration of financial markets
- Third-party due diligence services
Dynamic market structure
Over the years, there has been a significant rise in the number of participants in the forex market, and this has expanded the FX trading volume. The participants include hedgers, speculators, and central banks.
Financial institutions accounted for half of the overall FX trading volume in 2015. Non-reporting banks accounted for half of the financial institution's trading volume in 2015, followed by hedge funds or proprietary trading firms and institutional investors. With the participation of non-dealers, the trading volume of the market has increased significantly. The non-dealers include other financial institutions and non-financial customers.
The growth in net-net daily average of the forex trading volume due to the role played by non-dealers is proof of the market expansion in terms of execution platforms and services. The proof of the degree of expansion is found in the fact that the trading volume, which was once dominated by inter-dealer market or trading between dealers, shifted to other financial institutions. This shift started in 2010 and continued through 2013 when the other financial institutions accounted for over half of the reported volume.
Growth in integration of financial markets
The growth in the integration of financial markets helps in increasing the liquidity in the equity market. Integrated financial markets help domestic investors buy foreign assets and foreign investors to buy domestic assets, reducing the risks involved.
“It has been established that regulatory changes have no impact on the functioning of the capital market because the involvement of different international markets has led to an efficient global allocation of savings for future use. This helps different countries create an opportunity for portfolio diversification, sharing of the risks, enhance the growth, and raise the standard of living. Therefore, it is important to focus on the market integration through various capital flows in different international markets, various co-movements of returns, and liquidity position of different markets,” says Amit Sharma, a lead research analyst at Technavio for ITO and BPO research.
Third-party due diligence services
Third-party due diligence remains one of the primary mandates of the Dodd-Frank Wall Street Reform Act of 2010. The providers of such services play a major role in boosting transparency in the issuance of assets-backed securities through the Exchange Act Rule 15Ga-2 and Rule 17g-10. Technavio estimates that this mandate has increased public reporting standards as it has become mandatory to be rated by a nationally recognized statistical rating organization (NRSRO.) It is an advantage for the issuer or the underwriter.
“Third-party due diligence makes it mandatory for the providers to describe the manner and scope of the due diligence process. Such procedures make findings and conclusions transparent and may yield insights into the securitization process. The public disclosure of asset-backed securities should provide a detailed analysis to investors and help them decide on portfolio diversification,” says Amit.
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Technavio analysts employ primary as well as secondary research techniques to ascertain the size and vendor landscape in a range of markets. Analysts obtain information using a combination of bottom-up and top-down approaches, besides using in-house market modeling tools and proprietary databases. They corroborate this data with the data obtained from various market participants and stakeholders across the value chain, including vendors, service providers, distributors, re-sellers, and end-users.
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