Global Financial Crises and the Future of Securitization
Securitization is the process of taking some illiquid assets, or a collection of assets, and through engineering for finance where the assets are transformed into a security.
Also, securitization may be described as a practice through which an issuer makes an instrument of funding by linking other financial resources and marketing various ranks of the repackaged tools to the stockholders.
The process of securitization may encompass numerous categories of financial assets and enhances cash flow in the marketplace. Besides securitization reduces the cost of the company, provide the organization with immediate cash for the sales, provide some tax benefits and reduce company’s receivables.
Also, securitization as a financial tool ensures there is global marketing of the enterprise’s products and increase the market share of the business. Securitization has led to surrogate securitization since the investors are willing to buy the debt that has a high credit rating assigned by the agencies who delegate due diligence.
Furthermore, numerous types of securitization are under severe stress since investors are demanding for the decrease in structure demand, and relative fez securitization is occurring. Nevertheless, the alternatives of the securitization like bank loaning, which represents a reduction of financial sources(Kothari, 2006).
