Fixed-rate is a type of interest rate that does not change over time. This means that the borrower will always pay the same amount of interest on the loan, regardless of how interest rates change in the market.
In the context of securitization, fixed-rate securities are those that have a fixed interest rate. This means that the investors in these securities will receive a fixed income stream, regardless of how interest rates change in the market.
Fixed-rate securities are often used in securitizations because they offer investors a predictable income stream. This can be attractive to investors who are looking for a safe and stable investment.
Here are some applications of fixed-rate in securitization:
- Attracting investors: Fixed-rate securities can be attractive to investors who are looking for a safe and stable investment. This can be helpful for securitization issuers who are looking to attract investors for their securitizations.
- Managing risk: Fixed-rate securities can help to manage risk in a securitization. By having a fixed interest rate, the securitization issuer can reduce the risk of interest rate fluctuations.
- Providing liquidity: Fixed-rate securities can provide liquidity to the securitization market. This is because they are often easier to sell than other types of securitization securities.