Implicit support

In the context of a securitization, someone – usually a bank; more rarely also a hedge fund – stands in for the securitized securities beyond the scope of the contractually agreed obligations. This is done, for example, by the institution buying the securitized securities if necessary and including them in its own portfolio. Such purchases were frequently observed in the course of the subprime crisis because the originating banks wanted to avoid credit risk. – Hedge funds were concerned that securities that had suddenly been sold would not lose too much of their value if the fund itself had taken on an exposure to the securities in question – which were valuable and covered by first-class mortgages or leases that had been serviced without difficulty. In such cases, buying in and thus stabilizing the price was often cheaper than a high loss write-off (high wirte-off). – See Absence capitalism, Credit enhancement, Development procedure, iterative, Constant net asset value money market fund, Reintermediation, Reputation, Repatriation option, Retransfer clause, Repayment, early, Structured investment vehicle, Securitization structure, Special purpose entity consolidation.

Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent!
University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/