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Securitisation & Derivatives

Securitisation

Securitisation is a relatively new but fast-growing form of debt financing. The process of securitisation involves the packaging of a pool of usually homogenous assets that typically generate predictable cash flows, and selling these to investors in the form of securities backed by the cash flows arising from the assets.

From an originator's perspective, the main advantages of securitisation include the ability to raise finance at a relatively low cost, partial or total removal of assets from its balance sheet, diversification of funding sources, access to the capital markets for unrated entities and access to liquidity.

From an investor's perspective, securitisation offers an investment medium which, for a given rating level, usually offers higher returns than the equivalent rated bank or corporate debt.

Depending on the originator's financing requirements, and the characteristics of the underlying assets, funding can be arranged through term securities, balance sheet warehouse facilities or asset backed commercial paper.

Derivatives

Market risks wreak havoc on your ability to project future costs or returns on your business. Interest rates, foreign exchange rates, and equity prices are among some of the biggest culprits of market risk today. Thousands of corporations have mitigated these risks through the use of derivatives, which are financial contracts designed to hedge or manage market risks.

There are lots of different ways to hedge and manage market risk, and no one solution is right for all businesses. Call CIBC FirstCaribbean today to see how you can avoid needless market risks and plan for your business's future.