A caveat is a warning or caution. In the context of securitisation, a caveat is a warning to investors that there are risks associated with investing in securitised products.
The caveat may be issued by the securitisation vehicle, the originator of the loans, or a regulatory body. The caveat may warn investors about the risks of default by the borrowers, the risks of illiquidity, or the risks of fraud.
Caveats are an important part of securitisation. They help to protect investors by warning them about the risks of investing in securitised products.
It is important to note that caveats are not the only way to protect investors. Investors should also do their own research before investing in securitised products.