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web3glossarysecuritization
Securitization

Summary

Securitization is the process of converting an illiquid asset into a security, which can then be sold to investors. This process often involves pooling various types of contractual debts such as mortgages or loans, and creating marketable securities backed by these assets.

Detailed Description

In securitization, various financial assets are bundled together into a single security that can be sold on the financial markets. The resulting securities are often divided into tranches with varying levels of risk and return, allowing investors to choose based on their risk appetite. This process helps to enhance liquidity for the original holders of the assets and provides investors with new investment opportunities.

Category
Finance / Investment
Synonyms
Mortgage-backed Security
Structured finance
Collateralized debt obligations
Asset-backed Security

Impact Details

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Mortgage-backed securities

Pooling together a group of mortgage loans to issue a security that pays out interest based on the pooled mortgage payments.

Industries:

Real Estate
Banking

Platforms:

Real estate finance platforms
Investment banks
Student loan securitization

Bundling student loans into securities to provide funding to educational institutions or investors.

Industries:

Education
Finance

Platforms:

Financial aid platforms
Investment firms
Mortgage-backed securities

Pooling together a group of mortgage loans to issue a security that pays out interest based on the pooled mortgage payments.

Industries:

Real Estate
Banking
Investment Management

Platforms:

Real estate finance platforms
Investment banks
Asset-backed commercial paper

Short-term securities backed by assets, typically used to finance inventories or receivables.

Industries:

Corporate Finance
Treasury Management

Platforms:

Commercial paper market
Financial institutions

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