CHAPTER 16
Securitization
ASSET-BACKED SECURITIES, COLLATERALIZED DEBT OBLIGATIONS, AND STRUCTURED INVESTMENT VEHICLES
Over the years, banks have developed a number of techniques for selling loans to investors. This process is called securitization. Bank loans are transformed into securities, which are sold to investors. As mentioned in Chapter 12, one of the economic reasons for this process is to remove the loans from the balance sheet so as to avoid the costly Bank for International Settlements (BIS) capital requirements. The purpose of this chapter is first to introduce the securitization process. Because this process is costly, the various ...
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