The income-generating assets of a company are pooled separately from its balance sheet into a special-purpose vehicle (SPV), and the SPV issues a security backed by the cash flow to be generated by such assets and sells the security to investors. This method is called "securitization." And the security issed through such a proces is generally called a "securitized product." Business enterprises use their assets- such as auto loans, mortgage loans, lease receivables, business loans, and commerical real astate- as collateral to back up their securitized products.
The role of inancial executives in any business has expanded signiicantly
in recent years as companies become more accountable to their stakeholders
and regulators. Combine this increase in accountability with the
increasing sophistication of technology, risk management, inancial analysis,
and inancial records processing, and we see that the responsibilities of
inancial executives in any organization have expanded signiicantly.
our goal with The Complete CFO Handbook is to provide inancial
executives with the background and tools for managing a company’s inancial
The balance sheets of life and non-life insurance companies reflect the importance of
technical (insurance underwriting) risks for insurance firms. Life insurance companies
typically have the greater part of their liabilities taken up by technical provisions, in some
jurisdictions more than 80 percent. This reflects the amount that the firm is setting aside to
pay potential claims on the policies that it has written. Correspondingly, more than 90 percent
of the assets of life insurance companies comprise the investment portfolio held to support
As the Basel Committee on Banking Supervision has pointed out, it has become
increasingly important to look beyond the traditional earnings and economic
value effects and assess indirect interest rate effects as well. Taking a broader
view of the potential earnings impact of changing interest rates, banks also
need to take into consideration the growing share of (interest-sensitive) fee-
based ﬁ nancial services (loan servicing, asset securitization programs, pay-
Chapter 4 - Analyzing investing activities. In this chapter you will be able to: Define current assets and their relevance for analysis; explain cash management and its implications for analysis; analyze receivables, allowances for bad debts, and securitization; interpret the effects of alternative inventory methods under varying business conditions; explain the concept of long-term assets and its implications for analysis;...
The money market is traditionally defined as the market for financial
assets that have original maturities of one year or less. In essence, it is
the market for short-term debt instruments. Financial assets traded in
this market include such instruments as U.S. Treasury bills, commercial
paper, some medium-term notes, bankers acceptances, federal agency
discount paper, most certificates of deposit, repurchase agreements,
floating-rate agreements, and federal funds.
Uninsured low-income childless adults are a diverse group that includes men and women living in all
parts of Wisconsin. About half of these adults are working full time or are self-employed, working full
time. Over half have not had a checkup during the past two years. Twenty-two percent of low-income
uninsured childless adults have a chronic condition; that is, have been diagnosed as having arthritis, heart
disease, diabetes, cancer, or a stroke.
This is a print on demand edition of a hard to find publication. The financial crisis of 2007-09 highlighted the changing role of financial institutions and the growing importance of the żshadow banking system,ż which grew out of the securitization of assets and the integration of banking with capital market developments. In a market-based financial system, banking and capital market developments are inseparable, and funding conditions are tied closely to fluctuations in the leverage of market-based financial intermediaries.
Securitized instruments are rapidly growing, albeit from a very low base. The most active
instrument is the FIDC (Asset Backed Securities), used to securitize a variety of assets
including trade receivables and loans, as well as expected revenues in infrastructure projects.
CRIs (Mortgage Backed Securities) are used to securitize mainly loans related to sale of real
estate. This product has been one of the fastest growing instruments in Brazil.
At the same time there were progressively more skeptical views on the impact of
securitization on the financial system stability. Some argue that by making illiquid loans liquid
securitization could increase, other things being equal, the risk appetite of banks (Calem and
LaCour, 2003; Wagner, 2007; and Brunnermeier and Sannikov, 2009). Risk sharing within the
financial sector through securitization can also amplify bank risks also at the systemic risk level
(Brunnermeier and Sannikov, 2010).
Real estate investment is about creating and adding value through the effective
management of property assets. Real estate is fundamentally no different from other mainstream
investments: the analysis of property investments can be easily integrated into the capital market
framework. Capital asset pricing theory evolved into the capital asset pricing model (CAPM).
The CAPM model, described by Franfurter (1995: 104) as the ‘keystone’ of financial theory,
has been tested in financial securites (stock exchange) markets over three decades.
The crisis has shown that securitization is heavily dependent on markets’ perceptions and could
be subject to sudden bouts of illiquidity generated from investors’ concerns. Namely the
consequences of the increased participation in bank funding by financial markets’ investors and
the large increases in securitized assets, can led to acute liquidity crises.
Such a criticism of course applies with particular force to the US Federal Reserve since, in addition to their monetary responsibilities, they are also the regulator of US bank holding companies. They need to explain why they were not more forceful and effective in getting banks under their charge to reduce the concentration risk associated with large holdings of both unsecuritized and securitized mortgages and other asset-backed securities.
10 Reform of Wall Street compensation plans has been discussed for some time, going back well before this crisis.
Chapter 24 - Managing risk off the balance sheet with loan sales and securitization. This chapter discussed the increasing role of loan sales in addition to the legal and regulatory factors that are likely to affect the future growth of this market. The chapter also discussed three major forms of securitization pass-through securities, collateralized mortgage obligations (CMOs), and mortgage-backed bonds and described recent innovations in the securitization of other FI assets.