Good evening John
at the end of the articles, he says that ALL of the money is distributed not just the 85% which has been securitized. he also mentions some sort of 'incentive'.
can you please explain this please.. as i dont get this last paragraph in the article.
regards
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Securitization/Tranching Technical article
9y ago#1Appreciate that the reason the bank is doing this in the first place is because they think they are at a big risk of not receiving the money from their loans - if they didn't think they were at such risk they would not bother.
The unsecured lenders are therefore taking a very big risk - they might well end up with nothing. So one way or persuading them to lend the money is for them to receive all of any surplus that is left after paying out the other lenders their interest - that is the incentive for them to lend the money.
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