The underlying principle of ________ is that a large number of borrowers in a pool will reduce the ________ via diversification.

Question

Quizplus · Accepted Answer

The underlying principle of asset securitization is to pool together a large number of borrowers and their assets, and then sell securities backed by those assets to investors. This reduces the credit risk as the default risk is spread across a large pool of borrowers, which helps to diversify the risk.

The Underlying Principle of ________ Is That a Large Number