• Staff Mediterraneo Capital Ltd

SECURITIZATION OPERATIONS - HOW TO INCOME ASSETS THAT DO NOT PRODUCE CASH FLOW

Aggiornato il: lug 2

The financial sector is an important part of a country's economic system, therefore it is essential to keep it strong, active and dynamic through constantly updated techniques and tools, so that it can act as a driving force for the economy.

Financial innovations are therefore very important, aimed at providing new tools for solving specific problems, but also at creating new opportunities for businesses of any type, in order to increase competitiveness, especially in an era such as ours characterized by a "market global".


A vital need for the financial and banking sector is undoubtedly the finding of liquidity. Historically, companies have mainly relied on credit institutions to meet their financial needs, due to the impossibility, especially for small and medium-sized enterprises, of exploiting the advantages offered by alternative channels such as financing through bond loans, which are among the other always results more onerous than the banking ones.


One of the financial innovations that best meets this increasingly widespread need is "securitization" an instrument that in recent years has increasingly assumed a primary role within the global financial sector.


The term "securitization" is the one coined in the USA when this financial technique was developed, while the use of "securitization" became widespread in Europe, however they refer to the same type of transactions. Another frequently used term with the same meaning is Structured Finance.


Securitization is a financial technique that arises as an alternative to traditional capital raising methods, and consists in the disinvestment of a portfolio of loans or other assets, through their securitization, or their conversion into negotiable securities on financial markets, especially secondary ones (bonds).


The objective of this section of our blog is to analyze the operating methods and the development of securitization, in order to obtain a global vision of this technique that few know and can put into practice with profit.


This treatment does not have the unrealistic objective of being exhaustive, given that a complete treatment of the matter would require larger spaces, but simply aims to provide the knowledge necessary to understand the mechanism of securitization, its advantages and its limits.


Below is an index of the topics that we will cover in the coming months:


SECURITIZATION: GENERAL ASPECTS

1.0 Introduction to Securitization

1.1 The structure of a securitization transaction

1.2 The subjects involved

1.2.1 The originator

1.2.2 The Special Purpose Vehicle

1.2.3 The rating company

1.2.4 Credit Enhancement

1.2.5 Figures for administration and control


1.3 Main advantages obtainable through securitization

1.3.1 Benefits for the originator

1.3.2 Benefits for investors

1.4 Birth and evolution of the securitization market


SECURITIES ANALYSIS ISSUED BY THE SECURITIZATION


2.1 General characteristics

2.1.1 The main ABS structures

2.2 The ABS placement market


THE ASSIGNMENT OF RATING IN SECURITIZATION OPERATIONS


3.1 Data analysis and modeling

3.2 Binomial Expansion Tecnique

3.2.1 Application of the "BET" method to a group of credits


ANALYSIS OF A SECURITIZATION OPERATION:


4.1 Analysis of the initial loan portfolio

4.2 Issuing of ABS

4.3 Forms of credit enhancement within the transaction

4.4 Transaction flows


Conclusions

Bibliographical references



#securitisation #securitization



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