securitization

(redirected from Asset securitization)
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Related to Asset securitization: mortgage

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 ?
Among a broad range of topics on military-civilian industry integration and capital market initiatives, participants focused on asset securitization strategies of military enterprises as an effective vehicle for the reform in mixed ownership system, the new government initiative that is expected to bring a second SOE revolution.
Asset securitizations continue to be an important part of capital structures in the United States.
Despite the greater complexity of a system of intermediation based on asset securitization, which appears to have migrated and proliferated outside of the traditional boundaries of banking, our findings suggest that banks maintained a significant footprint in much of this activity through time.
The firm aims to run mainly businesses as asset securitization and discretionary account operation, Lo said.
To overcome this situation, the Financial Law 44/2002, of 24 November, defines Mortgage Transfer Certificates, and establishes that mortgage participations, grouped under asset securitization funds, may correspond to loans and credits that do not meet the requirements stipulated in the Law 2/1981, of 25 March, for the Regulation of the Mortgage Market, referred to in the preceding paragraph.
The use of ASPV schemes in asset securitization transactions has been permitted in Singapore since 2004, although the authorization for ASPVs was due to expire at the end of 2008.
'Shadow banking'--notably asset securitization and money-market mutual funds--now supplies 33 percent (up from 14 percent).
BNP Paribas offers a full complement of Shariah compliant services to corporate and institutional clients covering sukuk, equity derivatives, credit derivatives, interest rate & currency hedging, asset management, asset securitization, real estate, murabaha financing, structured finance, project finance and export credit facilities.
HB 272, Laws 2005, imposes corporate tax on limited liability entities (including limited liability companies, limited liability partnerships, real estate investment trusts, regulated investment companies, real estate mortgage investment conduits and financial asset securitization investment trusts) by including such entities in the definition of "corporation"
A staple in the credit card and mortgage industry for many years, asset securitization has finally come to the software business.
'Secondary Market Tax-Exempt Asset Securitization,' published by the American Bar Association (Chicago, IL), provides an analysis of business considerations as well as legal issues for secondary market securitization of tax-exempt assets, including the securitized "TOB" market.
The "Assessment of Capital Adequacy" and the "Asset Securitization" sections have been updated to discuss the Board's July 17, 2004, approval (effective September 30, 2004) of its revisions to the risk-based capital requirements for asset-backed commercial paper (ABCP) programs.