Securitisation: Difference between revisions

Revision as of 13:52, 20 November 2023

1. Assets - tradeable securities.

The process of converting non-tradeable assets into tradeable securities.

For example turning non-tradeable assets, like residential mortgage loans, into tradeable assets (such as mortgage-backed securities).

This is often undertaken through a securitisation special purpose vehicle.

The credit risk of the assets is divided into tranches, and payments to the investors are dependent on the performance of the assets.

When a special purpose vehicle is used, the assets are transferred to the special purpose vehicle, which then issues securities.

Non-performance of underlying assets is a key risk for investors, and was one of the triggers for the Global Financial Crisis (GFC).

2.

The tradeable securities created by the securitisation process.

3. Securities - issuance.

The trend for larger non-financial companies to use less bank lending facilities and instead to issue their own securities direct to the markets.

@@ Line 1: / Line 1: @@
-.  ''Assets - tradable securities''.
+.  ''Assets - tradeable securities''.
-The process of converting non-tradable assets into tradable securities.
+The process of converting non-tradeable assets into tradeable securities.
-For example turning non-tradable assets, like residential mortgage loans, into tradable assets (such as mortgage-backed securities).
+For example turning non-tradeable assets, like residential mortgage loans, into tradeable assets (such as mortgage-backed securities).
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 .
-The tradable securities created by the securitisation process.
+The tradeable securities created by the securitisation process.