The benefits to securitization from the issuer's perspective are that
A)it helps to reduce the degree of private information contained in an illiquid asset and therefore liquefies the issuer's financial conditions.
B)it permits the issuer to avoid reserve and capital requirements.
C)it reduces market incompleteness.
D)a and b only
E)a and c only

Question

Quizplus · Accepted Answer

Securitization reduces private information contained in illiquid assets by pooling them with other assets and creating securities that can be sold on the market. This helps to liquefy the issuer's financial conditions. Additionally, securitization can allow issuers to transfer some of the risk associated with the assets to investors, which in turn can lower capital requirements and reserve requirements for the issuer. However, securitization does not necessarily address market incompleteness on its own.

The Benefits to Securitization from the Issuer's Perspective Are That