The procedure of creating marketable debt instruments that are backed by otherwise illiquid assets is known as:
A) homogenisation.
B) securitisation.
C) standardisation.
D) hybridisation.

Question

Quizplus · Accepted Answer

The procedure described in the question is known as securitisation. This involves taking illiquid assets (such as mortgages or car loans) and pooling them together to create a larger pool of assets. This pool is then divided into smaller securities that can be sold to investors, with each security representing a fraction of the overall pool. These securities are often rated by credit rating agencies and can be bought and sold on various markets. This allows institutions to borrow money without resorting to traditional bank loans, while diversifying their sources of funding.

The Procedure of Creating Marketable Debt Instruments That Are Backed