FRM Part II · FRM Exam Part II · An Introduction to Securitisation
In a securitisation waterfall, which party is typically responsible for holding the assets on behalf of noteholders and monitoring that the SPV complies with the transaction documents?
The trustee holds the security on behalf of noteholders and monitors that the SPV complies with the transaction documents. The originator has sold the assets, the underwriter distributes the notes, and the liquidity provider only bridges temporary cash shortfalls.
- ATrusteeCorrect
- BOriginator
- CUnderwriter
- DLiquidity provider
Explanation
The trustee acts for the noteholders, safeguards the collateral and enforces the covenants in the documents. The originator sold the assets, the underwriter places the notes, and a liquidity provider only covers temporary cash shortfalls.
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