Beruflich Dokumente
Kultur Dokumente
Dr Kishor Bhanushali
Securitization
Tremendous growth of due to liberalization Financial development Innovative financial techniques Innovative financial instruments Asset securitization
Underlying assets
Securitization, as financial technique, is
concerned with trading in securities, backed by pool of mortgage loans Share in income and principal payments generated by the underlying mortgages
Securitization defined
Assets securitization is the process of separating
certain assets from the balance sheet and using them as collateral for the issuance of securities. Securities may then be rated and sold based upon the economic quality of the assets. Raising fund through the sale of this commercial paper can provide substantial savings over the traditional term loans
Securitization defined
Securitization may be defined as a method of
funding any kind of receivables (mortgage debts, leases, loans, credit card balances etc). It involve producing bearer assets backed securities which can freely traded secured on a portfolio of receivables.
Features of securitization
Marketability : (a) legal system and systematic
possibility of marketing instruments (b) the existence of market Merchantable Quality: rating Wide Distribution Homogeneity Commoditization: cresting an instruments which can be placed in the market Integration and Differentiation De-construction
Facilitating liquidity
Utility of Instruments
the end-customers Special Purpose Vehicle / Special Purpose Entity / Special Purpose Company Repository of the assets or claims which is being securitized
Securitization Mechanism
Origination
Assets Characteristics
Cash Flow
Security
Distributed Risk Homogeneity No Executory Clauses Capacity Independent from Originator
Benefits of Securitization:
Off balance sheet financing
Credit enhancement
Low costs Assess to market Benefits to investors
Diversification
Promoting savings Reduced costs Diversified risks Focus on use of resources