secularization

Question 1

tree steps of secularization

Answer 1

1. the originator create a pool of assets, offer credit
2. the collateral is sold to spe
3. spe issue ABCP to investor backed by cf of collateral

Question 2

benefit to issuer (originator)

Answer 2

1. increase of business activity : lend more
2. increase of profitability: fees and pv of collateral
3. increase liquidity: sell iliquid loans and receive PV
4. lower capital reserves: reduce credit risk, met regulations.

Question 3

benefit to investor

Answer 3

1. tailored return
2. access
3. liquidity

Question 4

benefit to economy

Answer 4

1. less market liquidity risk
2. less cost of funding
3. market efficiency
4. lower leverage (grow without debt)

Question 5

bankruptcy remote

Answer 5

decline from issuer does not affect spe collateral

Question 6

purchase agreement

Answer 6

terms of purchase of collateral by spe

Question 7

prospectus

Answer 7

fees and distribution of cf from collateral