What is the process of securitization?

The process of securitization involves transforming a group of assets into a security. This process typically includes pooling various types of financial assets, such as mortgages, car loans, or credit card debt, and then packaging those assets into securities that can be sold to investors. By doing so, the cash flows generated from those underlying assets are used to pay the security holders.

This practice allows the originators of the loans, like banks or other financial institutions, to free up capital for more lending activities while providing investors with an opportunity to invest in a diversified pool of income-generating assets. Securitization can enhance liquidity in financial markets and provide broader access to capital.

The other options, while related to financial concepts, do not accurately define securitization. For instance, turning liquid assets into cash quickly refers to the concept of liquidity rather than securitization itself. Pooling investments to minimize risk describes diversification but does not specifically capture the essence of creating securities from assets. Negotiating the sale of financial debts pertains to the management of debt rather than transforming them into investable securities. Thus, option B correctly identifies the core aspect of securitization.