Question

Securitization, the process of forming new securities by bundling or slicing up groups of securities like mortgages and bonds, is

a. considered shady by legitimate financial institutions.
b. well understood by financial analysts and managers who engaged in it.
c. still only a minor portion of the modern financial system.
d. a way of reducing risk through diversification.

Answer 1

The correct answer is letter "A": a way of reducing risk through diversification.

Step-by-step explanation:

Securitization is the process of converting an asset or group of assets into a marketable security. Often, the securitized assets are divided into different layers tailored to the investment risk tolerance of different types of investors. The process of securitization creates liquidity in the marketplace for the assets being securitized.