Securitisation
The use by corporations of the securities markets
as a source
of external finance, instead of banks and other financial inter-
mediaries. All sorts
of things can be securitised, from car loans
to mortgages and credit-card receivables. By aggregat-
ing existing debt of
this kind in pools, and then issuing new se-
curities backed by the collateral provided by the pool,
securitisation does two main things:
it gives other investors the
opportunity to share in the
profits;
it enables the originating banks and financial institutions
to spread their risk without having to sacrifice a share of
the profit.
(See also asset-backed securities.)
Security
There are two main meanings.
1 Something of value given
to a lender by a borrower to
support his or her intention to repay. In the case of a mort-
gage, the security is the property that the loan is being used to
purchase. (See also collateral.)
2 Evidence (on paper or otherwise) that
its owner is entitled to
a share of the equity of a company. The term (usually used in
the plural) applies to common and preferred stock, war-
rants and rights, as well as bonds (both interest-bearing
and those convertible into stock).
Seller’s market
A market in which
the seller has the upper hand; where
demand for securities outstrips supply; and where as a con-
sequence prices are expected to rise.
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SELLER’S MARKET
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