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What do you mean by securitization?

幫考網(wǎng)校 2020-10-10 16:13:15
Securitization is the process of converting illiquid assets into tradable securities. It involves pooling together a large number of assets, such as mortgages, car loans, or credit card receivables, and then issuing securities that are backed by these assets. The securities can then be sold to investors who receive a share of the cash flows generated by the underlying assets. Securitization is often used to free up capital for lenders, reduce risk by diversifying the underlying assets, and provide investors with access to a broader range of investment opportunities. However, securitization also played a role in the 2008 financial crisis as some securitized assets were found to be of poor quality and led to significant losses for investors.
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