Revolving period is the period of time during which the cash flows from the underlying assets can be used to purchase new assets. In the context of securitisation, the revolving period typically follows the accumulation period and precedes the amortization period.
The length of the revolving period will vary depending on the type of securitisation and the structure of the transaction.
In a revolving securitisation, the cash flows from the underlying assets are used to purchase new assets until the revolving period ends.
Once the revolving period ends, the cash flows from the underlying assets are used to repay the investors.
Revolving securitisations are often used for assets that have a short maturity, such as credit card receivables.
Here are some applications of revolving period in securitisation:
- Mortgage-backed securities: In a mortgage-backed security, the revolving period is typically used to purchase new mortgages.
- Collateralized debt obligations: In a collateralized debt obligation, the revolving period is typically used to purchase new debt securities.
Revolving periods can be an important tool for securitisation, as they allow the securitisation to continue to grow even after the underlying assets have been repaid.