Definition of Securitization:
Securitization is the procedure where an issuer designs a marketable financial instrument by merging or pooling various financial assets into one group. The issuer then sells this group of repackaged assets to investors. Securitization offers opportunities for investors and frees up capital for originators, both of which promote liquidity in the marketplace.
Distribution of default risk by grouping debt obligations (such as mortgages) into a pool, and then selling securities backed by this pool.
The conversion of an asset, especially a loan, into marketable securities, typically for the purpose of raising cash by selling them to other investors.
In theory, any financial asset can be securitized—that is, turned into a tradeable, fungible item of monetary value. In essence, this is what all securities are.
How to use Securitization in a sentence?
- In securitization, an originator pools or groups debt into portfolios which they sell to issuers.
- Issuers create marketable financial instruments by merging various financial assets into tranches.
- Securitized instruments furnish investors with good income streams.
- Products with riskier underlying assets will pay a higher rate of return.
- Investors buy securitized products to earn a profit.
- $20 billion of assets, made liquid through securitization, would be a strong draw for investors.
Meaning of Securitization & Securitization Definition