Introduction to Securitization

Preface

There is a choice of books on securitization, collateralized debt obligations (CDOs), and structured credit products. In fact, both of us have written other books on the subject. This book, however, was conceived as a short, handy and easy-to-comprehend guide to securitization, minus technical details. The idea originated while both of us were working on a comprehensive article on securitization: One which says it all in a limited space and serves as a curtain-raiser on the subject. As we were both very happy with the result of our efforts, we realized that practitioners as well as students need a simpler introduction to securitization than what they are being served in compendious volumes full of details that they may not need. Hence, the caption Introduction to Securitization.

When we were writing this book, the subprime crisis had already started erupting from various quarters. Different commentators had already started criticizing securitization for the subprime losses and consequent repercussions on the global economy. By the time we completed the book, securitization seemed to have become a hated word by several people. Though we have seen financial innovation over several years and we may easily distinguish between a temporary fad and a basic bad, we asked ourselves serious questions about the fundamental logic of securitization. Our analysis has been that securitization as a tool tries to weave a structured fabric, picking up threads from the financial assets ...