Securitization
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Securitization is the process whereby financial instruments that were previously thinly traded are converted to a form that creates greater liquidity. Securitization also applies to the situation where specific assets are pledged as collateral for securities, thus creating asset-backed securities. One example of the former is junk bonds; an example of the latter is mortgage-backed securities.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Securitization. The process whereby financial instruments that were previously thinly traded are converted to a form that creates greater liquidity. Securitization also applies to the situation where specific assets are pledged as collateral for securities, thus creating asset-backed securities. One example of the former is junk bonds; an example of the latter is mortgage-backed securities.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
