What are the benefits of Securitization?
Securitization has a number of benefits, including increased liquidity, diversification, and access to capital markets.
How does Securitization work?
In securitization, an illiquid asset is pooled together and sold as a security to investors. The security is then divided into different tranches which have different levels of risk associated with them.
What are the risks associated with Securitization?
The main risks associated with securitization are credit risk, liquidity risk, and interest rate risk. Credit risk is the risk that the underlying assets may not perform as expected, leading to losses for investors. Liquidity risk is the risk that the security may not be able to be sold in the market. Interest rate risk is the risk that interest rates may change, leading to losses for investors.