What is synthetic securitization in SAP FS-BA-PM-CR - Credit Risk?

SAP Term: synthetic securitization

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: Structure containing at least two vertically arranged risk items or tranches, which have different degrees of risk. In order to hedge the credit risk of this portfolio, the credit risks from the underlying receivables are transferred to credit derivatives with such as credit linked notes or without such as credit default swaps a financing function, or are transferred either partially or completely to guarantees.

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• Key Concepts: 
  Synthetic securitization is a process used in the Financial Services industry to manage credit risk. It involves pooling together a group of assets and then creating a new security, or “synthetic security”, that is backed by the assets in the pool. This synthetic security can then be sold to investors, who will receive payments from the underlying assets in the pool. 
  
  How to use it: 
  SAP Credit Risk Management (FS-BA-PM-CR) provides a comprehensive solution for managing synthetic securitization. It allows users to create and manage pools of assets, create synthetic securities, and track payments from the underlying assets. It also provides tools for analyzing credit risk and managing liquidity. 
  
  Tips & Tricks: 
  When creating a synthetic security, it is important to consider the creditworthiness of the underlying assets in the pool. This will help ensure that investors receive regular payments from the security. Additionally, it is important to monitor liquidity levels in order to ensure that payments can be made on time. 
  
  Related Information: 
  For more information on SAP Credit Risk Management (FS-BA-PM-CR), please visit https://www.sap.com/products/credit-risk-management.html