The assets to be securities should have the following characteristics.
A principal pan of the assets should be the right to receive from the debtors on certain dates, that is the asset can be analysed as a series of cash flows.
If the security available to collateralising the cash flows is valuable, then this security can be realised by a SPY.
Assets either have to have a distributed risk characteristic or be backed by suitably-rolled credit support.
No Executory Clauses
The contracts to be securitised must work even if the originator goes bankrupt.
Independence From the Originator
The ongoing perfonnance of the assets must be independent of the existence of the originator.
Instruments of Securitisation
Securitisation can be implemented by three kinds of instruments differing mainly in their maturity characteristics. They are, (i) Pass through certificates, (ii) Pay through securities. (iii) Stripped securities: