GLOSSARY OF TERMS
The current economic crisis has brought these esoteric terms into mainstream conversation.
| TERMS | | Securitization – Securitized | | |
Turning something into a security. For example, a seller could bundle a group of individual assets together, such as mortgages, thereby turning the assets into a security or financial product that can the be traded to investors.
Banks, pension funds, or other institutional investors who purchase these securities receive an income stream when the original home-buyers pay their monthly mortgage payments.
Within the pool of individual assets are sections called tranches. These tranches will vary in value according to the perceived risk associated with the expected income stream from the underlying assets.
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