Structure of a Securitization transaction
The primary purpose of the securitization is to make assets tradable, which by their nature are not, or to transform a loan portfolio into transferable securities.
The basic scheme of the operation is described below and illustrated in the image below.
Scheme of a securitization transaction
All securitisations are attributable to this scheme even if there is not only one type of securitization historically and statistically, since almost every operation can be said to make history in itself. In fact, securitization transactions may differ as regards the type of assets used, the method of transfer of the same, the location of the risk among the subjects involved, the type of securities issued, and so on.
In practice, the securitization mechanism can be summarized as follows:
a subject, technically called an "originator", transfers the assets and / or liabilities entered in its financial statements to an external subject, called the "Special Purpose Vehicle" or synthetically "SPV", which issues bonds that are negotiable on the market - generally known as Asset-Backed-Securities or ABS - to finance the purchase of credits.
Sometimes SPVs are also referred to as "SPE (Special Purpose Entity)" or "special purpose vehicle".
The securities issued against securitization transactions, compared to comparable traditional debt securities, are more isolated from credit risk and are particularly suited to the demands of the demand, which comes from institutional investors.
For this reason, companies, governments, public bodies, banks, individual operators and owners of wealthy family assets use securitization to transform their assets into liquidity, through the issue of asset-backed securities, that is, guaranteed, not by the merit of credit of the issuer, but from the expected financial performance of the underlying portfolio.
Participating subjects do not end with those exposed (ie originator, SPV and investors); the greater the complexity of the transaction, the greater the number of parties involved, there are also many variables that affect the structure, costs and issue of securities within a securitization transaction.
These aspects are analyzed in detail below, trying to make the mechanism and purpose of this innovative but tested financial operation clear and comprehensible.
SECURITIZATION: GENERAL ASPECTS
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
SYNTHETIC NEWS ON CURRENT SECURITIZATION OPERATIONS
REGULATION (EU) 2017/1129 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC