Serial pay is a type of securitisation structure in which the tranches are paid off in equal installments over time.
- This means that each tranche receives the same amount of principal repayment each month, until the tranche is fully paid off.
- The tranches with the lowest risk are typically issued at a higher price, while the tranches with the highest risk are typically issued at a lower price.
Here are some applications of serial pay in securitisation:
- To reduce risk: Serial pay can be used to reduce risk for investors. This is because each tranche is paid off in equal installments, which means that investors in these tranches are less likely to lose money if there is a default.
- To attract investors: Serial pay can be used to attract investors. This is because investors who are looking for a steady stream of income may be attracted to the tranches of a serial pay securitisation.
- To increase liquidity: Serial pay can be used to increase liquidity for investors. This is because the tranches of a serial pay securitisation are paid off in equal installments, which means that investors can sell their tranches as they are paid off.