Question

4. The technique by which a financial company converts its illiquid, non-negotiable, and high
value financial assets into smaller value, tradable and transferable securities, is known as:
a) Securitisation
b) Dematerialisation
c) Factoring
d) Forfaiting​

Answer 1

Explanation:

Among the various options given in question statement the correct option is the first one.

Securitisation is a finance concept that includes converting an illiquid asset or group of assets, high valued into securities which can be transferred easily as they become more secure and traceable.

Examples of such case is a mortgage-backed security where an asset is linked with some security

Answer 2

The technique is Securitisation.

• Securitisation is characterized as an interaction of change of illiquid resources into security which might be exchanged later in the initial market.
• So, securitization is the change of illiquid, non-attractive resources into protections that are fluid and attractive resources.
• It also pools in various dues such as commercial and residential mortgages, any credit card obligations or auto loans.