The goal of securitization is to:
A) lock a constant rate of return for up to 10 years.
B) ensure one financial institution holds all the risk.
C) diversify risk by buying different classes of assets.
D) sell paper to Fannie Mae and/or Freddie Mac.
E) earn high returns for investors.

Question

Quizplus · Accepted Answer

Securitization is the process of pooling together assets (such as mortgages, loans, or credit card debt) and then issuing securities backed by those assets. The goal of securitization is to diversify risk by creating different classes of securities with varying levels of risk and return. This allows investors to choose securities that match their risk preferences, while also allowing the issuer to sell off the assets to raise funds.

The Goal of Securitization Is To