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Securitization

Money

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Securitization

By: iMinds
Narrated by: Emily Sophie Knapp
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About this listen

Learn about securitization with iMinds Money's insightful fast knowledge series. Securitization as a financial term has evolved over the decades, as different methods and products have developed from the process. At a basic level, securitization is the process of taking an illiquid asset, or a group of relatively homogenous assets, and through financial engineering, transforming them into a security. The assets are pooled together and repackaged into a single security, which is then sold to investors. The security entitles them to the incoming cash flows and other economic benefits generated by the asset pool.

Securitization originated in the late 1980s in the form of both mortgage backed securities and asset backed securities. There are many similarities between securitization and secured lending, or asset backed lending. In secured lending, the lender requires the borrowing firm to commit specific assets of that firm as security or collateral for the loan. A securitization differs from this process in several ways. In a securitization, the cash flow generated by the asset pool can be employed to support investing in other securities. Rather than relying on the sale or the use of current assets as a guarantee to finance their investment, a firm can use the receivable income expected from its current assets to generate income immediately. The end result of the securitization is that a firm can obtain funding without having to borrow anything, but through the sale of income receivable assets to investors.

iMinds will hone your financial knowledge with its insightful series looking at topics related to Money, Investment and Finance.. whether an amateur or specialist in the field, iMinds targeted fast knowledge series will whet your mental appetite and broaden your mind.

©2010 iMinds Pty Ltd (P)2010 iMinds Pty Ltd
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Critic reviews

"I'm learning all sorts of stuff about stuff I didn't even know I didn't know. And it sticks. In a nutshell: wonderful." (Jonathon Margolis, Financial Times)

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simple and practical

i really like this book, bevause is simple and praxtical to understand the securitization market.

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