Tenor refers to the length of time until the maturity of a securitisation. The tenor of a securitisation is typically expressed in years.
For example, a securitisation with a tenor of 5 years will mature in 5 years. The tenor of a securitisation is important because it determines the length of time that investors will have to wait to receive their money back.
Tenor is sometimes referred to as "term" or "maturity".
Here are some of the applications of tenor in securitisation:
- To manage liquidity: The tenor of a securitisation can be used to manage liquidity. For example, an issuer may issue a securitisation with a short tenor if it needs to raise cash quickly. An issuer may issue a securitisation with a long tenor if it wants to lock in a long-term source of funding.
- To manage interest rate risk: The tenor of a securitisation can be used to manage interest rate risk. For example, an issuer may issue a securitisation with a floating-rate tenor if it wants to hedge against rising interest rates. An issuer may issue a securitisation with a fixed-rate tenor if it wants to lock in a fixed interest rate.
- To create new products: The tenor of a securitisation can be used to create new securitisation products that meet the needs of different investors. For example, an issuer may issue a securitisation with a tenor that matches the tenor of the underlying assets.
It is important to note that the tenor of a securitisation is not the only factor that determines the liquidity or interest rate risk of a securitisation. Other factors, such as the credit quality of the underlying assets, also play a role.