An instalment is a payment that is made over a period of time. Instalments are typically used to repay loans or other financial obligations.
In securitisation, instalments are used to create a stream of cash flow that can be used to pay the interest and principal on the securitisation securities. The underlying assets in a securitisation transaction are typically loans or receivables that generate instalment payments.
There are a number of applications for instalments in securitisation. One application is to create a predictable stream of cash flow. By pooling together a number of instalment payments, the securitisation issuer can create a predictable stream of cash flow that can be used to pay the interest and principal on the securitisation securities.
Another application of instalments in securitisation is to reduce the risk of default. By pooling together a number of instalment payments, the securitisation issuer can reduce the risk that the securitisation will default. This is because the securitisation issuer will still receive a stream of cash flow even if some of the underlying loans or receivables default.
Here are some other applications of instalments in securitisation:
- To make securitisation transactions more attractive to investors
- To reduce the cost of borrowing for the originator
- To increase the liquidity of the securitisation market
Instalments can be a useful tool for both investors and originators. For investors, it can help to reduce the risk of default and to make securitisation transactions more attractive. For originators, it can help to reduce the cost of borrowing and to increase the liquidity of the securitisation market.