Securitization transforms illiquid assets into tradable securities from "summary" of Financial Markets and Institutions, Global Edition by Frederic S. Mishkin,Stanley G. Eakins
Securitization is a financial process that involves transforming illiquid assets into tradable securities. Illiquid assets are those that cannot be easily bought or sold on the market due to their unique characteristics or lack of ready buyers. By securitizing these assets, financial institutions are able to convert them into securities that can be bought and sold on the open market. This process typically involves pooling together similar types of illiquid assets, such as mortgages or auto loans, and selling shares of this pool to investors. These shares represent a claim to the cash flows generated by the underlying assets, allowing investors to earn a return on their investment. By securitizing these assets, financial institutions are able to free up capital that would otherwise be tied ...
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