Process of securitization, Financial Management

Assignment Help:

Steps involved in the Process of Securitization

The following are the major steps involved:

  1. The lender (also called the originator) - in this example, the NBFC - segregates its loans portfolio into homogeneous pools, which are then transferred to a Special Purpose Vehicle (SPV). 

  1. On its part, the SPV issues asset-backed debt instruments. These can be with or without recourse.

  1. Interest and principal on the underlying pool of assets are collected and transmitted to the investors by a designated party which can also be the original lender.

  1. Credit enhancement in the form of a guarantee from the original lender will boost investor confidence. Advantages and disadvantages of securitization obviously help in improving the seller's (the originator or the lending company) liquidity. Its capital is freed for other uses. Group or sectoral exposures can be altered through this route. Interest rate mismatches can be corrected.      


Related Discussions:- Process of securitization

Working capital, discuss the applicability of an operating cycle considerin...

discuss the applicability of an operating cycle considering broilers?

How to calculate the net income of a year, Is the net income of a year the ...

Is the net income of a year the money the company made that particular year or is it a number whose significance is quite doubtful? The net income of a year is not money that a

Forecasting yield volatility, There are several methods available to ...

There are several methods available to forecast yield volatility. But before that, let us look into the calculation of forecasted standard deviation. Assume th

Commercial paper, Commercial Paper (CP) is a short-term unsecured pro...

Commercial Paper (CP) is a short-term unsecured promissory note issued in the open market. It also represents the obligation of the issuer. Normally, it is issued

What do you signify by investment decisions, Q. What do you signify by Inve...

Q. What do you signify by Investment Decisions? Investment Decision: - The most significant function of financial management isn't only the procurement of external funds for th

Explain the average rate of return method, Q. Explain the Average Rate of r...

Q. Explain the Average Rate of return Method? Average Rate of return Method (ARR): This method is as well known as Accounting Rate of Return Method. It is on the basis of accou

Call provisions, The issuer's right to call back the issue before the...

The issuer's right to call back the issue before the maturity date is referred to as a "call provision". In case of asset-backed securities, the trustee is grante

Approaches to financial management, mention the advantages and disadvantage...

mention the advantages and disadvantages of the traditional approach

Define advantages and the disadvantages of a new stock issue, What are the ...

What are the advantages and the disadvantages of a new stock issue? A new stock issue increases funds and reduces the riskiness of the firm. It as well tends to send a negative

Calculate current cash debt coverage ratio, Calculate Current cash debt cov...

Calculate Current cash debt coverage ratio: Financial statements for Delta Company are presented below:   Delta Company Balance Sheet December 31, 2012

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd