What Is Securitization?

Firminy Capital Sarl, a company established in 2007 in Luxembourg, is lead by professionals specializing in a range of financial fields. Firminy Capital Sarl manages the Firminy Equity Fund, a securitization fund. The process of securitization takes an individuals financial assets and turns them into securities. These securities can then be bought and sold in financial markets, similar to the way stocks and bonds are traded. It is important to realize the liquidity of an asset when converting it into a security. Liquidity is the ease with which an asset can be turned into cash at its proper value. For example, the process of securitization is commonly used within real estate where bank-issued mortgages, though not easily converted to cash, are repackaged as "securities," which make them more easily converted. A bank or other institution investing in securitization will seek to pool together a large number of mortgages from various homeowners. Dividing that pool into shares, the bank or institution then sells those shares as "securities." Buyers who purchase the shares that came from that pool of mortgages are consequently able to collect mortgage payments made by the homeowners who placed their mortgage into the pool. These are referred to as "mortgage-backed securities," and are the financial instruments than can then be sold to investors in order to make a profit.