Question

Which of the following correctly describes Securitisation?

A Giving enough credit risk security to any equity Correct Answer Incorrect Answer
B Giving enough credit risk security to any debt security Correct Answer Incorrect Answer
C Giving enough market risk security to any equity Correct Answer Incorrect Answer
D credit risk in assets are redistributed by repackaging them into tradeable securities with different risk profiles Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

Securitisation involves transactions where credit risk in assets are redistributed by repackaging them into tradeable securities with different risk profiles which may give investors of various classes access to exposures which they otherwise might be unable to access directly. It means securities issued by the special purpose entity as a part of a securitization.

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