securitizing
Converting to bonds
Securitizing is the process of converting assets—typically loans or debts—into tradable securities.
A bank might bundle thousands of mortgages together, then sell shares in that pool to investors: The firm made billions securitizing subprime mortgages.
The practice spreads risk but can obscure it, as the 2008 financial crisis demonstrated.
Backed by home loans
- collateralizedBacked by pledged assets
- tranchesPortions of a whole
- asset-backedSecured by underlying property
- poolingMerging shared contributions
structuring · pass-through · originator · issuer · servicer · sponsor · waterfall · subordination
Ties that unite
- investorsThose who commit capital
- underwritingRisk evaluation and acceptance
- liquidityConvertibility to cash
- tradingExchanging for value
issuance · placement · pricing · spread · yield · disclosure · prospectus
Preset standard option
- subprimeUnder top credit tier
- exposureState of being unprotected
- retentionContinued holding or possession
- correlationStatistical relationship measure
Loans secured by property
- receivablesOutstanding amounts owed you
- leasesContracts granting temporary use
- royaltiesOngoing payments to creators
- equipmentTools for a task
mortgage-backed
Backed by home loans
- collateralizedBacked by pledged assets
- tranchesPortions of a whole
- asset-backedSecured by underlying property
pooling · structuring · pass-through · originator · issuer · servicer · sponsor · waterfall · subordination · mezzanine
bonds
Ties that unite
- investorsThose who commit capital
- underwritingRisk evaluation and acceptance
- liquidityConvertibility to cash
trading · issuance · placement · pricing · spread · yield · disclosure · prospectus
default
Preset standard option
- subprimeUnder top credit tier
- exposureState of being unprotected
- retentionContinued holding or possession
correlation · contagion · downgrade · impairment · counterparty
mortgages
Loans secured by property
- receivablesOutstanding amounts owed you
- leasesContracts granting temporary use
- royaltiesOngoing payments to creators