Asset Characteristics

The assets to be securities should have the following characteristics.

Cash Flow

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.

Security

If the security available to collateralising the cash flows is valuable, then this security can be realised by a SPY.

Distributed Risk

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:

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