securitization

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Securitization

Creating a more or less standard investment instrument such as the mortgage pass-through security, by pooling assets to back the instrument. Also refers to the replacement of nonmarketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued in the public capital markets.

Securitization

The process by which a company packages its illiquid assets as a security. For example, when a company makes an initial public offering, it effectively packages the company's ownership into a certain number of stock certificates. Securities are backed by an asset, such as equity, or debt, such as a portion of a mortgage. Securitization allows a company access to greater funding to expand its operations or investments, or some other reason.

Securitization.

Securitization is the process of pooling various types of debt -- mortgages, car loans, or credit card debt, for example -- and packaging that debt as bonds, pass-through securities, or collateralized mortgage obligations (CMOs), which are sold to investors.

The principal and interest on the debt underlying the security is paid to the investors on a regular basis, though the method varies based on the type of security. Debts backed by mortgages are known as mortgage-backed securities, while those backed by other types of loans are known as asset-backed securities.

securitization

an arrangement which involves putting together a claim on particular assets of a business which is then sold as a negotiable security in the financial markets. Securitization is mainly undertaken by financial institutions; assets involved typically include commercial paper, mortgages, car loans, export credits and credit card receivables.

Securitization enables the issuing institution to raise ready cash, thus improving its liquidity. Purchasers of such securities seek to profit by obtaining claims on assets at less than their redemption value, but they may choose to on-sell their claims in the market.

securitization

a financial technique for raising loan capital that involves a firm issuing a CORPORATE BOND backed by certain specified assets owned by the firm. The interest charges on the bond and the eventual repayment of the bond itself are met by the income streams earned by the underlying assets, while the capital sum raised by the bond can be invested in other areas of the firm's activities. The alternative way to release the capital represented by the underlying assets would be to sell them off or to DEMERGE them into a separate business.

securitization

The process of taking many individual assets and combining them into a group,or pool,so that investors may buy interests in the pool rather than in the individual assets.The creation of collateralized mortgage backed securities is one example.The process increases the number of possible investors due to the ability to sell shares in the pool at relatively modest prices.In addition, because of the high degree of predictability inherent in large groups of things, the process of securitization increases predictability,lowers risk,and therefore increases value.

Example: On a single flip of a coin, how much would you bet that the coin would land heads up? On 20,000 flips of a coin, how much would you bet that it would land heads up fifty percent of the time, give or take two percent? This is a fundamental concept of securitization.

References in periodicals archive ?
Topics covered include: the changing role of trustees; European CMBS; European ABCP market; IT technology in securitisation,; securitisation of domestic assets in the emerging markets; North American structured finance; CDO markets; Student loan market; UK and US RMBS market; insurance product securitisation market.
The Review features country and regional reviews that cover securitisation aspects in Asia, Australia, Austria, Belgium, Benelux, France, Italy, Latin America, Mexico, Netherlands, South Africa and the US, plus more.
The development of Germany's relatively young securitisation market stems from the German True Sale Initiative, the country's securitisation platform.
His knowledge of the capital markets and securitisation businesses, as well as his relationships with industry participants, enhances our ability to serve Germany's growing true sale market.
Collateralised debt obligations and synthetic securitisation structures
understand the innovative applications of whole business securitisations, insurance and embedded value securitisation and the workings of monoline insurance; and
explore securitisation in emerging markets and the growing market for Islamic securitisations.
The Global Securitisation Review 2004 / 2005 is a comprehensive guide to securitisation activity worldwide.
Topics covered include: Extendable note programmes, Asset - backed commercial paper market RMBS, CDOs and CMBS, while country and regional reviews focus on securitisation in: Asia, Australia, Austria, Czech Republic, Europe, France, Italy, Latin America, Luxembourg, Mexico, Nordic Region, Portugal, Scotland, Spain, Switzerland, UK and US.
Special Report on Securitisation in Europe examines a number of structured finance instruments now popular in Europe, including collateralised debt, mortgage-backed securities, whole-business securitisations, and synthetic securitisations.
For one, the Basel Committee is proposing a series of scaling factors, for asset-backed securities (ABS) relative to corporates, to be applied to securitisation exposures according to external credit ratings.
International Securitisation Report (ISR), published by Thomson Financial, announced the winners at its annual awards dinner held last night at the Dorchester Hotel in London.