Seasoning is the time period over which a pool of assets has been observed.
- In the context of securitisation, seasoning is important because it allows investors to assess the performance of the underlying assets.
The longer the seasoning period, the more data investors have to work with, and the more confident they can be about the future performance of the assets.
Seasoning is also important because it can help to reduce risk.
For example, if a pool of assets has been seasoned for a long period of time, it is less likely that there will be any unexpected surprises.
Here are some applications of seasoning in securitisation:
- To assess risk: Seasoning can be used to assess the risk of a securitisation. The longer the seasoning period, the lower the risk is typically considered to be.
- To price securities: Seasoning can be used to price securities issued by a securitisation. The longer the seasoning period, the higher the price of the securities is typically considered to be.
- To make investment decisions: Seasoning can be used to make investment decisions. Investors may be more likely to invest in a securitisation with a longer seasoning period.