Three Securitization Terms to Know
Located in Luxembourg City, Firminy Capital Sarl provides clients with securitization fund management services. In order to understand the services that a firm like Firminy Capital Sarl provides, it is important to learn the meaning of common terms related to securitization funds. Asset Backed Security: Although the term securitization refers to the process through which an illiquid asset becomes liquid, an asset backed security (ABS) is a security funded by assets other than mortgages. These assets may include items such as loans, credit card debt, or aircraft leases. Special Purpose Vehicle: A special purpose vehicle (SPV) is the entity that assumes a company’s debt in order to lower financial risk during the securitization process. Transferring debt to another entity allows corporations to make large financial investments while protecting the company from the threat of bankruptcy. Collateral: Collateral is a word used to describe assets put up by borrowers to protect lenders against financial losses. During securitization, collateral exists in the form of the pooled assets that back up securities.