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Asset Securitization: What does it provide to markets

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Asset Securitization is a major factor in financial markets. What does Asset Securitization provide to markets? What kinds of assets get securitized?

Do you think computerization and globalization have an impact upon;

1. The types of assets that get securitized?
2. The amount of assets (both value and number) that get securitized? and
3. the breadth of the market?

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Assets Securitization

Asset securitization can be defined as the way in which assets can be hedged in derivative market. The assets securitization is used by the banks to transform the non-liquid assets of the organizations into liquid assets. It also helps the banks to find the cost effective funding sources and to manage the risk in a better way. Asset securitization can also be described as the structured process in which interest on loan and other receivables are underwritten, packaged and sold in the form of asset-backed securities (Asset Securitization, 1997).

Benefits to Market

The asset securitization increases liquidity in the market by converting the non-liquid assets in liquid assets. It also causes an increase in return on capital for a firm by converting the on-balance-sheet lending position into the off-balance-sheet fee income stream that facilitate less expenses for the business as it is less capital intensive. It also lowers the borrowing cost and release additional capital that helps in expansion and reinvestment purpose of an organization. It facilitates market growth by enhancing capital investment activities (Asset Securitization, 1997). It also helps to improve the asset and credit risk ...

Solution Summary

The expert determines what a market provides. Asset securitization are examined.