Selling a stream of contingent revenues to another party, at a discount to the expected value is called:

Securitization is the financial process of taking illiquid assets, such as future revenue streams, pooling them, and repackaging them into interest-bearing securities. The issuer sells these securities to investors, thereby transferring the rights to the future cash flows and the associated risks. The securities are sold at a discount to the total expected value of the future revenues to provide a yield to the investors, compensating them for the time value of money and the inherent risks of the underlying assets. This process directly matches the description of selling a stream of contingent revenues at a discount.

A. Prioritized investment: This term refers to an investment strategy or capital allocation preference, not the sale of revenue streams.

B. Reinsurance: This is a specific practice within the insurance industry for transferring risk, whereas securitization is a broader financial mechanism applicable to many asset types.

C. Profit: This is the financial gain from a transaction (revenue minus costs), not the name of the transaction process itself.

1. Gorton

G. B.

& Souleles

N. S. (2005). Special purpose vehicles and securitization. In M. Carey & R. Stulz (Eds.)

The Risks of Financial Institutions (pp. 549-590). University of Chicago Press. In Section 10.1

the authors define securitization as "the pooling of financial assets

and the subsequent sale to investors of claims on the cash flows backed by that pool of assets." This sale is implicitly at a discount to provide a return to investors.

2. Kothari

V. (2006). Securitization: The Financial Instrument of the Future (2nd ed.). Wiley. Chapter 1

"An Introduction to Securitization

" describes the process as the "repackaging of illiquid financial assets into marketable securities." This involves selling the rights to the cash flows from these assets to investors.

3. Ashcraft

A. B.

& Schuermann

T. (2008). Understanding the Securitization of Subprime Mortgage Credit. Federal Reserve Bank of New York Staff Reports

no. 318. On page 4

the report defines securitization as "the process of pooling and repackaging loans into securities that are then sold to investors

" which involves the sale of future contingent payment streams.

4. Cummins

J. D. (2008). CAT Bonds and Other Risk-Linked Securities: State of the Art and Recent Developments. Risk Management and Insurance Review

11(1)

23–47. https://doi.org/10.1111/j.1540-6296.2008.00131.x. This paper discusses the securitization of insurance risk (a form of contingent revenue)

where investors buy securities at a price that provides a risk premium over the risk-free rate

which is functionally a discount to the expected payout.