• An innovation that has a positive impact on one or more of a firm's existing products.
| ||Referenced Terms|
| ||Credit enhancement: The backing of paper with collateral, a bank LOC, or some other device to achieve a higher rating for the paper.|
The firm that securitizes mortgages guarantees against defaults on the underlying pool. This is called credit Enhancement.Purchase of the financial guarantee of a large insurance company to raise funds.
| ||Pickup: The gain in yield that occurs when a block of bonds is swapped for another block of higher-coupon bonds.The gain in yield that occurs when a block of bonds is swapped for another block of highercoupon bonds.Is the Enhancement in yield or income relative to a comparable treasury instrument.|
| ||Securitization: Securitization occurs when a financial security is created which is a claim to the cashflows of a collection (or pool) of individual real or financial assets (typically loans originated by banks or S&Ls). Hence, securitization turns a loan (an illiquid asset) into a liquid asset or a security.Is the process of homogenizing and packaging financial instruments into a new fungible one. Acquisition, classification, collateralization, composition, pooling and distribution are functions within this process. One common advantage of securitization is the Enhancement of liquidity relative to the underlying collateral or financial instrument. Another benefit is the movement towards standardization of unit specifications.The process of creating a pass-through, such as the mortgage pass-through security, by which the pooled assets become standard securities backed by those assets. Also, refers to the replacement of non marketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued in the public capital markets.|
| ||Related Terms|
| ||Credit enhancement|
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