Abstract
This chapter discusses the basic concepts of securitization. The chapter also discusses the motivation behind the use of securitization as well as their economic impact. Securitization is a well-established practice in the global debt capital markets. The driving force behind securitization has been the need for banks to realize the value from the assets on their balance sheets. Banks use securitization to support rapid asset growth, diversify their funding mix and reduce the cost of funding, and reduce maturity mismatches. Securitization can be used to remove nonperforming assets from banks' balance sheets. The process of structuring a securitization deal ensures that the liability side of the special purpose vehicle (SPV) carries lower cost than the asset side of the SPV. There are two main securitization structures: amortizing (pass through) and revolving. A third type, the master trust, is used by frequent issuers. All securitization structures incorporate a cash waterfall process whereby all cash that is generated by the asset pool is paid in order of payment priority.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
