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You are a finance employee at a financial institution, specializing in originating auto loans in a...

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Finance

You are a finance employee at a financial institution,specializing in originating auto loans in a country where autoloans have only been available for 2 years. Your group has justbeen informed that a close competitor has securitized $150 millionin auto loans through an investment bank.

  • Your boss wants to understand why the competitor did this.Explain.
  • He also wants to understand the potential benefits for thefollowing:
    • The issuer
    • The investors buying the ABS
    • The individual borrowers seeking auto loans
  • He also wants to know the likely impact to the auto loan marketin this country if a large, liquid ABS market emerges over the nextfew years.

Answer & Explanation Solved by verified expert
3.6 Ratings (386 Votes)
Securitization is creation of an asset which can be sold to investors from which revenue can be generated It is a liquid instrument compared to selling an auto loan directly The issuer would be    See Answer
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Transcribed Image Text

You are a finance employee at a financial institution,specializing in originating auto loans in a country where autoloans have only been available for 2 years. Your group has justbeen informed that a close competitor has securitized $150 millionin auto loans through an investment bank.Your boss wants to understand why the competitor did this.Explain.He also wants to understand the potential benefits for thefollowing:The issuerThe investors buying the ABSThe individual borrowers seeking auto loansHe also wants to know the likely impact to the auto loan marketin this country if a large, liquid ABS market emerges over the nextfew years.

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