Securitization

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Description of Securitization. Explanation.

Definition Securitization. Description.

Securitization is a financial technique that pools assets together by turning future cash flows into tradable, bond-like securities. Creating such asset-backed securities became a lucrative business for financial firms during the 1990s.

Benefits of Securitization:

• Businesses ("Issuers") can immediately realize the value of a cash-producing asset and get instant access to money for which they would otherwise have to wait months or years, and they can shed some of the risk that their expected revenue will not materialize.

• By selling securitized loans, investment banks are able to finance their customers without tying up large amounts of capital.

• Investors can hold a new sort of asset, less risky than unsecured bonds, giving them the risk-reducing benefit of diversification.

However there is always a risk that the future cash flows underlying the securities may flow earlier or later than promised, or not at all.

Securitization Forum   Synthetic Securities WHAT IS A SYNTHETIC SECURITY? A synthetic security is a cash flow stream created from a combination or decomposition of the cash flow associated with a set of instruments that exactly replicates the cash flow streams associated with the real ins...           Financial Engineering. Tools WHAT IS FINANCIAL ENGINEERING? Financial Engineering (FE) involves the design, development and the implementation of innovative financial instruments and processes, and the formulation of creative solutions to problems in finance. TOO...           Quotes on Securitization. Quotations Hi, do you know of a remarkable, humorous quote by a famous person or a proverb related to securitization? Please enter a reaction to share it for other people to enjoy! Please use this template: Author Name Year of Birth - Year of Death, short...         Begin a new topic

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Compare also: Intangible Assets

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