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Structured Finance Rating Methodologies

Ahmet E. Kocagil, Vasileios Papatheodorou

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Abstract

Abstract Securitization is a mechanism by which a portfolio of financial assets such as loans, receivables, corporate debt, and other usually illiquid assets is used as a collateral for collateralized debt obligation (CDOs) or other structured finance (ABS) securities issued, typically by a special purpose vehicle (SPV), in the market. The rating agencies evaluate the different tranches of the issued securities and issue ratings in order to provide an independent opinion on the credit quality of these securities. The aim of this article is to review the ABS and CDO rating methodologies applied in the securitization market.

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Abstract Securitization is a mechanism by which a portfolio of financial assets such as loans, receivables, corporate debt, and other usually illiquid assets is used as a collateral for collateralized debt obligation (CDOs) or other structured finance (ABS) securities issued, typically by a special purpose vehicle (SPV), in the market. The rating agencies evaluate the different tranches of the issued securities and issue ratings in order to provide an independent opinion on the credit quality of these securities. The aim of this article is to review the ABS and CDO rating methodologies applied in the securitization market.

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Available abstract

Abstract Securitization is a mechanism by which a portfolio of financial assets such as loans, receivables, corporate debt, and other usually illiquid assets is used as a collateral for collateralized debt obligation (CDOs) or other structured finance (ABS) securities issued, typically by a special purpose vehicle (SPV), in the market. The rating agencies evaluate the different tranches of the issued securities and issue ratings in order to provide an independent opinion on the credit quality of these securities. The aim of this article is to review the ABS and CDO rating methodologies applied in the securitization market.

Key concepts: Securitization, Collateralized debt obligation, Structured finance, Credit rating, Business, Debt, Collateral, Financial system

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