Question: Banks securitize assets by combining debt instruments and standardizing them to increase their liquidity, lowering the cost of capital to borrowers and transterring the risk

increase their liquidity, lowering the cost of capital to borrowers and transterring

Banks securitize assets by combining debt instruments and standardizing them to increase their liquidity, lowering the cost of capital to borrowers and transterring the risk to investors. This process is called secunitization. Consider the following case: Big Bank holds in excess of $200 mition in its mortgage and credit line portfolios. It is considering setting up a special purpose vehicle (SPV) and packaging the debt into asset-backed commercial paper (ABCP) in order to increase its loan capacity. redit line portfolic aper(ABCP) in or

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