Securitization can be achieved using a number of vehicles, including student and auto loans, credit card receivables, mortgages, and other financial assets. Here are some of its benefits:
-The ability to free capital. Securitization allows financial institutions to remove items from balance sheets, which frees up capital.
-Creating liquid assets. The action of securitization allows assets that were previously nontradable to become liquid.
-Lower risk trading. Because this financial technique creates a pool of assets, investors have the ability to choose how much risk they wish to undertake.
-Attractive to investors. Securitized products are attractive to investors because they are highly customizable.
-Lower capital costs. By creating more capital through these funds, investors are subject to lower interest rates, which lead to economic growth.