Securitisation
1.
The process of converting non-tradable assets into tradable 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 tradable securities created by the securitisation process.
3.
The trend for larger non-financial companies to use less bank lending facilities and instead to issue their own securities direct to the markets.
See also
- CDO
- CMBS
- Covered bond
- Factoring
- GFC
- Prospectus Regulation
- Securitisation Regulation
- Securitisation special purpose vehicle
- Securitisation swap
- Security
- Significant Risk Transfer
- SSPE
- Sukuk
- Whole business securitisation
