def. Securitization is the process of making a one-time loan product into a split product that pays fixed income and is tradable. Example.
- A company wants a $100 loan from the bank to build a factory
- The bank sets up a special purpose vehicle (SPV), which actually lends the money to the factory
- Simultaneously, the SPV issues Bonds worth $10 each that investors can buy, to get the cash to give to the company
- Bank makes profit in the credit spread between the loan and the bond.
