Question

    The financial practice of pooling contractual debt such

    as residential mortgages or auto loans and selling their related cash flows to third party investors is called?
    A Collateralisation Correct Answer Incorrect Answer
    B Securitization Correct Answer Incorrect Answer
    C Dematerialisation Correct Answer Incorrect Answer
    D Merchant Banking Correct Answer Incorrect Answer
    E Corporatisation Correct Answer Incorrect Answer

    Solution

    Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralized debt obligations (CDOs).

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