3 edition of Securitization found in the catalog.
|Series||Money and banking series|
|The Physical Object|
|Number of Pages||186|
In theory, any financial asset can be securitized—that is, turned into a tradeable, fungible item of monetary value. An allowance for unforeseen costs is usually essential in securitizations, especially if it is an atypical securitization. Home equity loans tend to be the most sensitive to changes in interest rates, while auto loans, student loans, and credit cards are generally less sensitive to interest rates. Key Takeaways In securitization, an originator pools or groups debt into portfolios which they sell to issuers. After this transaction, typically the originator would continue to service the receivables, in this case the credit cards.
Should a debtor cease the loan repayments on, say, his car or his house, it can be seized and liquidated to compensate those holding an interest in the debt. Under traditional corporate finance concepts, such a company would have three options to raise new capital: a loanbond issueor issuance of stock. However, stock offerings dilute the ownership and control of the company, while loan or bond financing is often prohibitively expensive due to the credit rating of the company and the associated rise in interest rates. Issuance[ edit ] To be able to buy the assets from the originator, the issuer SPV issues tradable securities to fund the purchase. The borrower could fail to repay the loan, and so banks often sell notes for cash.
The authors present a comprehensive overview of the topic based on the experience they have gathered through years of interaction with practitioners and graduate students around the world. Similarly, by securitizing a block of business thereby locking in a degree of profitsthe company has effectively freed up its balance to go out and write more profitable business. Portfolio diversification : Depending on the securitization, hedge funds as well as other institutional investors tend to like investing in bonds created through securitizations because they may be uncorrelated to their other bonds and securities. Any income remaining after payments and expenses is usually accumulated to some extent in a reserve or spread account, and any further excess is returned to the seller. Should a debtor cease the loan repayments on, say, his car or his house, it can be seized and liquidated to compensate those holding an interest in the debt.
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Motives for securitization[ edit ] Advantages to issuer[ edit ] Reduces funding costs: Through securitization, a company rated BB but with AAA worthy cash flow would be able to borrow at possibly AAA rates. In a typical master trust transaction, an originator of credit card receivables transfers a pool of those receivables to the trust and then the trust issues securities backed by Securitization book receivables.
The performance of the securities is then directly linked to the performance of the assets. Securitization allows the original lender or creditor to remove the associated assets from its balance sheets. Servicing[ edit ] A servicer collects payments and monitors the assets that are the crux of the structured financial deal.
Unlike the more traditional relationship between a borrower and a lender, securitization involves the sale of the loan by the lender to a new owner--the issuer--who then sells securities to investors. In some cases, this is a special type of instrument which is retained by the originator as a potential profit flow.
The issuer then sells this group of repackaged assets to investors. The object of the structuring is to model the characteristics of the securities such that they correspond to the needs of the final investor.
London: Routledge; Alison Gerard. In the case of certain assets, such as credit card debt, where the portfolio is made up of a constantly changing pool of receivables, a trust in favor of the SPV may be declared in place of traditional transfer by assignment see the outline of the master trust structure below.
Higher levels of risk correlate to higher interest rates the less-qualified borrowers of the underlying loans are charged, and the higher the risk, the higher the potential rate of return.
Created securities represent a stake in the assets in the portfolio. This title will be released on.
The Securitization of Migration and Refugee Women. This eBook is no longer available for sale. This diagram has been reproduced with the kind permission of its author, Mr. Repayment structures[ edit ] Unlike corporate bonds, most securitizations are amortizedmeaning that the principal amount borrowed is paid back gradually over the specified term of the loan, rather than in one lump sum at the maturity of the loan.
A third risk is that payments on the receivables can shrink the pool balance and under-collateralize total investor interest. The tranches can be structured in virtually any way that the issuer sees fit, allowing a single MBS to be tailored for a variety of risk tolerance profiles.
In the case of the invasion of Iraqone could say that the conflict was securitized militarily; weapons of mass destruction was one reason for the invasion. The issued securities are often split into tranchesor categorized into varying degrees of subordination.
Margin deposit: the assignor makes a margindeposit with the SPV. The authors offer coverage of such key topics as: structuring agency MBS deals and nonagency deals, credit enhancements and sizing, using interest rate derivatives in securitization transactions, asset classes securitized, operational risk factors, implications for financial markets, and applying securitization technology to CDOs.
A securitization can result in an extremely low interest rate for the issuing entity, since the securities are backed by a liquid form of collateral i.
The authors present a comprehensive overview of the topic based on the experience they have gathered through years of interaction with practitioners and graduate students around the world. Quite often, the securities are not issued on an exchange, but are distributed over-the-counter to a small number of investors.
Prepayment uncertainty is an Securitization book concern with fully amortizing ABS.Jan 14, · Kansas should create a framework for the securitization of uneconomic assets like coal plants, but a proposed state bill aimed at establishing such a securitization process should be treated with.
Securitization. The information provided in the following section pertains to securities backed by receivables serviced by Ally Financial.
It is intended for the use of institutional and corporate investors, investment banking firms, securities dealers and brokers, securities research analysts and other interested parties located in the United States of America.
May 06, · Buy The Mechanics of Securitization: A Practical Guide to Structuring and Closing Asset-Backed Security Transactions by Moorad Choudhry (ISBN: ) from Amazon's Book Store.
Everyday low prices and free delivery on eligible orders/5(6). The first chapter introduces securitization through a detailed discussion of an actual securitization of loans made to purchasers of Hondas.
The Honda deal is followed as an example throughout the subsequent chapters and numerous documents from the deal are reprinted in the atlasbowling.com Edition: 1. The book advances securitization theory by presenting a new framework for studying HIV as a policy process, uniting several theoretical strands into a single, powerful model for empirical application.
It uses this model to draw attention to important, understudied aspects of HIV securitization, including the role played by discourses about. Securitization is the process of taking an illiquid asset or group of assets and, through financial engineering, transforming it (or them) into a atlasbowling.com derisive phrase "securitization food.