Which of the following is true?
A)Securitization develops most easily in markets where financial assets are heterogeneous.
B)Securitization reduces interest rate risk for the issuer of asset-backed securities.
C)Securitization turns relatively liquid assets into illiquid assets.
D)Securitization increased rapidly in the 1980s but then decreased.

Question

Quizplus · Accepted Answer

Securitization reduces interest rate risk for the issuer of asset-backed securities by converting a set of illiquid assets into a more liquid form and spreading the risk among a wider base of investors. This process allows the issuer to remove these assets from their balance sheet, thus reducing their exposure to interest rate fluctuations.

Which of the Following Is True