Väärtpaberistama

Väärtpaberistama is an Estonian verb that translates to securitize in English. It refers to the process of transforming illiquid assets into marketable securities. This is commonly done with loans, such as mortgages, auto loans, or credit card receivables. The originator of the loans, typically a bank, bundles these assets together and then sells them to investors as new securities. These securities are often structured into different tranches with varying levels of risk and return. The cash flows generated by the underlying assets are then used to pay the investors. This process allows originators to free up capital, transfer risk, and generate fees. For investors, securitization offers opportunities to invest in diversified pools of assets and potentially achieve higher returns than traditional investments. However, it also introduces complexities and risks, as the value of the securities is directly tied to the performance of the underlying assets. The development of securitization markets has been a significant factor in the global financial system, influencing credit availability and risk distribution.