securitization

securitization(asset securitization) The process of turning assets into securities. Generally this involves an arrangement in which one party (the originator) sells a portfolio of assets, such as house mortgages or bank loans, to a special purpose vehicle (the issuer), who finances the purchase by packaging the cash flows from these assets as tradable financial instruments (securities), which are sold to investors. The arrangement may be a form of off-balance-sheet finance and now falls under Section 12 of the Financial Reporting Standard Applicable in the UK and Republic of Ireland International Accounting Standard 39, Financial Instruments: Recognition and Measurement. The prevalence of complex derivative products based on the securitization of subprime mortgages is widely seen as a key factor in the global financial crisis of 2007–08. See alsostructured finance.

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