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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.


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.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson


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.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005


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.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
It warrants mentioning that the revised proposal does justice to the increasing popularity of synthetic transactions by devoting a separate section on this recent structural innovation of securitisation. The earlier proposals in June 2000 were completely silent on synthetic securitisation.
Securitisation is a financial engineering technique where assets, and/or the rights to future cash flows are sold for cash to a third party.
Buckhead One Financial Opportunities LLC, has announced its completion of BFNS 2019-1, a USD216 million securitisation of subordinated debt of community banks from across the United States.
Many developed countries had experienced and involved in this unique innovation in the world of finance through issuance of bonds of intangible assets used for securitisation against future earnings.
Commercial assets such as planes, film rights, cell towers, and franchised consumer brands are increasingly being financed in the securitisation market.
of the USD 407 million of outstanding Class A-1 fixed rate asset backed notes and Class B-1 fixed rate asset backed notes associated with its aircraft securitisation, the company said.
The new framework outlines the procedures for securitisation transactions and grants the Central Bank of Cyprus (CBC) the power to authorise, regulate and supervise securitisation activities.
The ambiguous provisions require the Central Bank of Cyprus' approval for any securitisation and give the bank supervisor the right to veto such a transaction, Moody's said adding that the central bank's powers were "unusual" compared to what is the case elsewhere in Europe, as they allow it to initiate the liquidation of securitisation special purpose entities, appoint a liquidator or block a voluntary liquidation.
1 Plc (Tolkien), is the first Shari'ah-compliant public HPP backed securitisation in the UK.
There has been an increasing interest of foreign investors in the use of special purpose vehicles ('SPV') in the structuring of securitisation transactions in the UAE.
According to IFMR, this is the first pure play consumer durable securitisation transaction to be placed in India in over a decade.