- Trending Categories
- Data Structure
- Operating System
- MS Excel
- C Programming
- Social Studies
- Fashion Studies
- Legal Studies
- Selected Reading
- UPSC IAS Exams Notes
- Developer's Best Practices
- Questions and Answers
- Effective Resume Writing
- HR Interview Questions
- Computer Glossary
- Who is Who
Define concept of Debt securitisation in financial management.
Securitization is the procedure of converting assets into securities. In other words, securitization means all assets of a company are consolidated into securities.
An originator, special purpose vehicle (SPV), investment bank, credit rating agency, insurance company, obligator and investor are required in securitization.
The process involved in debt securitisation is as follows −
- Credit rating.
- Amount is collected into pool.
- Divide amount into small parts and sell that small parts as securities.
- Buyers who buy these securities will get interest.
- Mortgage backed securities.
Moreover, process continues as a cycle
Securitization is done on
- Term loans.
- Receivables (government & companies).
- Purchases loans.
- Lease finance.
- Mortgage loans etc.
Methods in debt securitisation are mentioned below −
- Pass through and pay through certificates.
- Preferred stock certificates.
- Asset based commercial paper.
Advantages of debt securitisation are −
- Act as source of fund (additional).
- Boots for liquidity.
- Rate of return is high.
- Diversification of portfolio.
- More profitable.
Disadvantages of debt securitisation are −
- High risk is involved.
- Complex financial structure.
- Related Articles
- Define financial statement analysis in financial management.
- What is financial management? Define objectives and scope of financial management.
- Define the components of financial management
- Define equity shares used in financial management.
- Define preference shares used in financial management.
- Define capitalisation and its type in financial management.
- What is debt restructuring in financial restructuring?
- Write about Financial breakeven in financial management.
- Explain about various financial statements in financial management.
- What are regulatory requirements in formulation of financial strategies in financial management?
- Explain the importance of financial management.
- The Production Concept of Marketing Management
- The Product Concept of Marketing Management
- Define financial objectives of an organisations.
- Write about cost of capital in financial management.