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 ?
An insurance securitization is the process through which an insurer or reinsurer accesses the capital markets by issuing asset-hacked securities supported by the assets and cash flows from a defined block of insurance contracts.
This must-attend industry event will feature high profile topics and speakers on the cutting edge of today's securitization markets.
Beyond securitization, respondents said they are considering surplus notes (73 percent), trust preferred securities (40 percent) and funding agreements (13 percent) as other sources for obtaining capital in the next two to three years.
Collecting contributions from legal advisers, structurers, facilitators, and regulators participating in the global securitization markets, Robbe (structured finance counsel, FMO, the Hague, the Netherlands) and Ali (law, U.
George Miller, executive director of the American Securitization Forum, gave a tribute to Mr.
Securitization agreements may contain certain "removal of accounts" provisions that give a transferor the right to periodically designate credit card accounts (and the related receivables) for removal from the pool of receivables securitized, assuming that certain conditions have been satisfied.
CHAPTER 3 Application of Securities Laws to Securitization Transactions
As a result, securitization transformed banks into mortgage aggregators, and enabled them to deploy their capital more efficiently elsewhere.
At the time, the transaction was the largest single borrower securitization ever done.
310 million securitization of the Mexico City-Toluca toll road.
Title II seeks to increase the availability of credit to small businesses by facilitating the securitization of small business loans.