Definition for : Securitisation

Securitisation, one of the Off-balance sheet financing techniques, consists in first choosing some Assets (Receivables, Inventories, buildings, Consumer loans, mortgages, etc) based on the quality of the Collateral they offer or their level of Risk. To reduce Risk, the Assets are then grouped into an SPV so as to pool Risks and take advantage of the law of large numbers. The SPV buys the Assets and finances itself by issuing securities to outside Investors.

(See Chapters Chapter 22 Shares and Chapter 26 Value and corporate finance of the Vernimmen)

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