The Concept of Securitization
Securitization is a process by which identified pools of receivables, which are usually illiquid on their own, are transformed into marketable securities through suitable repackaging of cashflows that they generate. The Broader Meaning of Securitization Securitization is the process of commoditization. The basic idea is to take the outcome of this process into the market, the capital market. Thus, the result of every securitization process, whatever might be the area to which it is applied, is to create certain instruments, which can be placed in the market. Securitization is the process of integration and differentiation: The entity that securitizes its assets first pools them together into a common hotchpot (assuming it is not one asset but several assets, as is normally the case). This process of integration. Then, the pool itself is broken into instruments of fixed denomination. This is the process of differentiation. Securitization is the process of de-construction Continue reading