Securitization occurs when receivables are bundled together and sold or transferred to another organization that issues securities which are not collateralized by the transferred receivables.

Question

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Securitization involves bundling receivables and selling them to a special purpose entity, which then issues securities collateralized by those receivables, not securities that are uncollateralized.

Securitization Occurs When Receivables Are Bundled Together and Sold or Transferred