Abstract
When a financial institution securitizes illiquid assets, it transforms them into tradable assets. To accomplish this in practice, the financial institution pools the illiquid assets, enhances them, and ultimately sells them to a third party. Because this third party has raised funds for the purchase by issuing securities in the capital market, the financial institution has transformed the illiquid assets into securities that are widely traded. Such asset-backed securities (ABS) have become a significant funding mechanism for consumer lending over the past fifteen years.
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Johnson, K.W. (2002). Consumer Loan Securitization. In: Durkin, T.A., Staten, M.E. (eds) The Impact of Public Policy on Consumer Credit. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-1415-2_10
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DOI: https://doi.org/10.1007/978-1-4615-1415-2_10
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