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Description
Securitization refers to a process in which financial engineering is used to convert the illiquid assets in to security (Brown, 2007). It includes any kind of financial assets and helps in achieving liquidity in the market. It benefits both the Creditors as they lower their risk by dividing the holding of debts and the Investors or lender as they earn security. It increases capital availability, lowers the capital cost, isolates risks, and helps in formulation of many lucrative investment options. The securitization products are of different kinds namely MBS (Mortgage Backed Securities), ABS (Asset Backed Securities), Credit card debts, hospital account receivables, student loans, Legal awards and Lottery winnings. Banks did not use securitization on a large scale before 1990’s (Obay, 2014).
