Q&A: what are the positive aspects of assets securitisation?

Query by Abuni J: what are the benefits of assets securitisation?

Very best answer:

Answer by I didn’t do it!
There are several benefits. To name just a few in a nutshell:
Securitization can enhance return on capital for the originator by converting on-balance sheet loans into an off-balance sheet fee income stream that attracts significantly less capital. It also improves asset and liability management as properly as credit threat management. In particular, by transforming illiquid assets into tradable instruments, the value of the threat is determined by market place forces instead of a theoretical valuation. By way of securitization, credit threat can be transferred from one particular entity to yet another, allowing a far better optimization of an individual utility function in terms of risk/return preference.
Payment streams from secritized assets can be structured to meet the certain requirements of investors, and most importantly, structural credit enhancements and diversified asset pools (e.g. in CDOs) do not demand that the investor requirements a detailed understanding of the underlying assets (e.g. in securitized credit card receivables).
Overall, asset scuritization has lowered the cost and elevated the efficiency of the borrow/loan markets significantly.

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