Special Purpose Vehicle (SPV)

A special purpose vehicle (SPV) is a legal entity that is created for a specific purpose or project. SPVs are commonly used in the financial industry to isolate the assets and liabilities of a particular project or investment from the assets and liabilities of the parent company. This separation allows the parent company to reduce its risk and protect its balance sheet from the potential risks and liabilities associated with the project or investment. SPVs can take various forms, such as a corporation, limited partnership, or trust, and are often used in structured finance transactions, such as securitization, in which the assets of the SPV are used as collateral for a loan or other financial instrument.