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The Securitization Process

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Asset-Backed Securities The Securitization Process Prof. Ian Giddy Stern School of Business New York University Asset-Backed Securities q The basic idea q What's needed? q The technique q Applications q Typical sequence Copyright 2001 Ian H. Giddy The Securitization Process3. Securitization of Assets q Securitization is the transformation of an illiquid asset into a security. q For example, a group of consumer loans can be transformed into a publically-issued debt security. q A security is tradable, and therefore more liquid than the underlying loan or receivables. Securitization of assets can lower risk, add liquidity, and improve economic efficiency. q Sometimes,assets are worth more off the balance sheet than on it. Copyright 2001 Ian H. Giddy The Securitization Process4. What is the Technique for Creating Asset-Backed Securities?

qIs the originator willing to undertake a complex, time - consuming transaction to obtain a broader, potentially cheaper, ongoing source of funding? ... qPre -sale report on an individual CLO, once risks have been evaluated but final terms and credit enhancement have not yet been finanized qFinal deal report

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