Question

In: Finance

Which of the following is / are not true about Securitization: - Select one: a. It...

Which of the following is / are not true about Securitization: - Select one:

a. It is process by which receivables are converted into securities

b. It is process by which collateral securities are given by borrowers to financial institutions for loan

c. It is a process by which default risk is transferred to third parties

d. It is a process in which SPV plays the vital role.

Solutions

Expert Solution

The following statement is not true about securitisation:

"b. It is process by which collateral securities are given by borrowers to financial institutions for loan"

Regarding others which are true:

(a) It is a process by which receivables arising out of financial assets are converted into marketable securities.

(c) Upon sales of such securities to third parties, attendant default risk also gets transferred

(d) Special Purpose Vehicle (SPV) plays vital role in securitization.


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