Introduction to ABS Flashcards
1
Q
What are the advantages of using securization?
A
- It removes the layer between borrowers and investors.
- It allows investors to have a stronger legal claim on the collateral pool of assets.
- Financial intermediaries can originate more loans than without the securitization process.
- It procures much better liquidity than the original loans on bank balance sheets.
- Securization encourages innovation in investment products.
- ABS offer companies an alternative means of raising finance.
2
Q
What is the structure of CDO transactions?
A
1) SPV is created
2) CDO manager is assigned
3) Funds to purchase collateral are raised
4) Covenants are put into place
5) CF are thrown off from underlying assets
6) Issuers attempt to earn higher returns on underlying that is paid out
