1. Posts in the subject areas are now being moderated. Please do not post any details about your exam for at least 3 working days. You may not see your post appear for a day or two. See the 'Forum help' thread entitled 'Using forums during exam period' for further information. Wishing you the best of luck with your exams.
    Dismiss Notice

Structured Finance vs Credit Secruitisation

Discussion in 'SP7' started by Clint Tan, Sep 20, 2019.

  1. Clint Tan

    Clint Tan Member

    I am confused by Structured Finance (Credit Enhancement & Credit Insurance Wrap) and Credit Securitisation.

    How are they different?
     
    Clint Tan, Sep 20, 2019
    #1
  2. Katherine Young

    Katherine Young ActEd Tutor Staff Member

    A credit enhancement is any strategy that improves a company's credit rating, eg by providing collateral on a debt, or by obtaining insurance to guarantee repayment of the debt, or by arranging a third party guarantee, etc.

    Credit wrapping is a type of credit enhancement whereby a bond insurer guarantees to meet interest and principal payments if the issuer cannot.

    Credit securitisation is the process whereby loans are packaged, underwritten and sold in the form of securities. More often it's just called "securitisation".
     
    Katherine Young, Sep 20, 2019
    #2

Share This Page