Difference between revisions of "Securitization"

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(Redirected page to Securitisation)
 
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== Definition ==
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#REDIRECT[[Securitisation]]
'''Securitization''' is a financial structure that generates a new security out of an existing collection of credit assets.
 
 
 
Securitization is a risk transfer technique that appeared in the US at the beginning of the 80s. In a securitization, a bank’s exposure to credit risk is transferred into a Special Purpose Vehicle (SPV) that issues securities to a broad array of investors. These securities are typically rated by rating agencies although some asset securitizations are private placements involving non-rated securities. Such techniques are used in many jurisdictions and encompass a wide range of credit exposures including for instance residential mortgages (mortgage-backed securities), corporate loans and credit card receivables. Although initially used to transfer credit risk, securitization techniques are also
 
used by large banks as an alternative way to raise funding.
 
 
 
== Usage ==
 
* Investors use securitization to obtain access (invest) in credit assets
 
* Originators may use securitization as part of their [[Credit Portfolio Management]] tools
 
 
 
== Risks ==
 
A securitization structure is a fairly elaborate setup that displays a varying risk profile to the different parties involved. For the ''investors'' in securitization bonds (tranches) the list of principal risk factors includes a combination of the following
 
* credit risk
 
* prepayment risk
 
* liquidity risk
 
 
 
To the extend that investors rely on their own or third party analysis and tools for assessing credit risk they may be further subject to [[Model Risk]]
 
 
 
== Issues and Challenges == 
 
* Incentives of the agents involved in the securitization pipeline
 
* Availability of data for risk analysis
 
* Transparency of structure
 
* Quality of third party risk assessments
 
 
 
== External Links ==
 
* [http://en.wikipedia.org/wiki/Securitization  Wikipedia]
 
 
 
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[[Category:Credit Risk‏‎]]
 
[[Category:Credit Portfolio Management]]
 
[[Category:Risk Elements‏‎]]
 

Latest revision as of 16:33, 11 October 2019

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