See "Asset backed security".
In revolving assets securitisation and
future flows securitisation, is the underlying covenant by which
the repayment of principal (amortisation) to the investors will
became immediately due upon the happening of certain events such
as a fall in the degree of over-collateralisation, under-performance
The bank which takes on the role of
the administration of the loan on behalf of the participants to
a securitisation transaction..
Repayment of the principal of a debt
in periodic instalments as opposite to a Bullet or Balloon repayment
The financial institution (bank or other)
which agrees to structure a securitisation transaction.
Asset backed commercial paper (ABCP)
An asset backed security issued in the
form of commercial paper.
Asset backed security (ABS)
Security issued under a securitisation
transaction where payment is secured against a pool of assets. May
take the form of a pass-through, a pay-through or a cash flow bond.
In the United States it is common to distinguish between ABS and
mortgage back securities (MBS). In the other markets (and in this
glossary, too) the word ABS may cover all classes of securitesed
The typology of financial assets that
support payments on the asset backed securities. Typical asset class
are mortgage loans, trade receivables, credit card balances, consumer
loans, lease receivables, automobile loans.
An instalment repayment structure for
a securitisation transaction under which the final redemption of
securities or the final repayment instalment is set at a greater
amount than that of earlier redemptions or instalments.
It is the basis rate used by a financial
institution to price the interest rate it charges for different
types of loan typically priced as certain percentage (or certain
number of basis point) other the basis rate.
A principal repayment structure which
repays the entire principal on the maturity date.
The financial institution that, in a
securitisation transaction, provides a cap contract. A cap is a
derivative contract in which the cap purchaser, on return of a premium,
will receive by the cap counterparty periodic payments on the excess
of the interest rate charged at an agreed basis rate on a notional
principal amount over an agreed strike rate. In this way, the purchaser
acquires the insurance that, on the borrowed amount, he will not
have to pay more than some maximum interest rate.
Cash collateral account
A type of external credit enhancement
in which the SPV borrows the required credit enhancement amount,
usually from a commercial bank, and that can be reinvested.
Cash flow bond
Securitised notes issued as bonds,
instead of pass through or pay through certificates. Examples
are collateralised mortgage obligation bonds, collateralised loan
obligation bonds, etc.
Collateralised bond obbligation (CBO)
Cash flow bond issued against a pool
of bond assets or other securities.
Collateralised loan obbligation (CLO)
Cash flow bond issued against a pool
of bank loan assets.
Collateralised mortgage obbligation (CMO)
Cash flow bond which comprises several
classes of bond issued against a pool of mortgage assets.
Collateral invested account
Type of external credit enhancement,
similar to a subordinated tranche, wich is either purchased on
a negotiated basis by a single third-party credit enhancer or
securitised as a private placement and sold to several investors.
One or more initiatives taken by the
originator in a securitisation structure to enhance the security,
credit or the rating of the securitised instrument. Credit enhancement
can be internal (subordination, overcollateralisation, yield spread,
excess spread, reserve fund), or external (surety bonds, third
party guarantee, letter of credit, cash collateral account, collateral
The amount of interest payments earned
on the underlying assets less bondholder payments and expenses.
The excess spread is the profit of the originator and can be used
to cover current-period losses or paid into a reserve fund to increase
The entity which, in a securitisation
transaction, raises funds by issuing securities: tipically, the
issuer is the SPV (special purpose vehicle).
Securities subordinated to senior class
securities in order of priority of repayment.
Institution (bank or other) wich sets
up and executes the securitisation transaction. The lead manager
also brings together the originator, the credit enhancer provider,
the investors and other parties to a deal.
Letter of credit
A promise by a financial institution
(typically a bank) to pay amounts to a beneficiary. In a securitisation
transaction it is the obligation, provided by a bank in exchange
of a fee, to stand by with cash to reimburse up to the required
credit enhancement amount.
A facility designed to provide the borrower
with the liquidity he needs to meet short-term cash requirements.
It is the process of gaining a quotation
on a Stock Exchange by compiling with the requirements of the Listing
The point at which a debt became due
and payable in full. In the case of a security the maturity will
be the redemption date assuming non early redemption date.
High yielding unsecured securities ranking
between secured debt and equity in terms of priority of payments.
Multiple tranche transaction
A securitisation transaction where the
SPV issues several classes of securities such as senior and junior
The institution (bank or other) which,
in a securitisation transaction, generates the receivables that
back the finance raised.
Type of internal credit enhancement
where the face amount of the financial asset pool is larger than
the security it backs.
Securitisation structure where the SPV
makes payments, or rather, passes payments to the investors, on
the same periods, and subject to the same fluctuations, as they
are in the actual receivables. This means that the actual amount
collected every month is passed through to investors, after deducting
Securitisation structure in which the
amortisation profile on pay-through securities needs not to be directly
linked to principal receipts from the pool of receivables. In this
case the SPV does not strictly pay the investors only when the receivables
are collected but keeps paying on the stipulated dates irrespective
of the collection dates.
Institution (bank or other) which acts
as agent of the issuer of securities on the purpose of effecting
interest and principal payments to investors.
German traditional secondary market
mortgage product. It is similar to the US concept of pass-through.
A sale of securities. The placement
can be private or public.
The face value of a security or the
amount lent by a lender to a borrower.
The order in which the debt is repaid.
The institutions which assign credit
rating to debt obligations on the basis of investigation and analysis
of the transaction and the issuer characteristics.
Account used to hold back a part of
the excess spread as a form of credit enhancement for the transaction.
A credit facility where amounts repaid
to the lender may subsequently be redrawn by the borrower.
Class of securities which have priority
for repayment purposes.
The entity which carries out the day-to
day collection and enforcement of the receivables which back the
finance raised in the securitisation transaction. In many case the
originator itself also performs the role of the servicer.
Special purpose vehicle (SPV)
The entity specifically established
to fulfil a set of functions or to undertake particular transactions.
In a securitisation transaction it is the entity which would hold
the legal rights over the assets transferred by the originator.
See "Special purpose vehicle".
A type of internal credit support characterised
by a senior class of securities and one or more subordinated classes
which payment is contingent upon repayment on full of the obligations
on the senior notes. In case of default, any loss is absorbed by
the subordinated securities. In this way the senior class is unaffected
unless the total losses exceed the amount of subordinated tranche.
The entity which provides the swap contract
against interest rate risk.
Third party guarantee
A type of credit enhancement in which
a third party (usually a rated insurance company or the seller or
the parent company) promises to reimburse a trust for losses up
to a maximum stated dollar amount. The third party can also agree
to pay on advance principal and interests.
Total net balance
Total face value of the portfolio of
assets that back the securities issued.
Total amount issued
Total face value of different tranche
of securities issued.
Institution (bank or other) which administers
the securitisation transaction, manages the inflow and outflow of
moneys and does all acts needed for protecting the investors rights.
A financial institution which serves
as an intermediary between an issuer and investors in an ABS offering.
Type of internal credit enhancement given
by the difference between the coupon on the underlying assets and
the security coupon.