In a 1989 study entitled “ Globalization and Canada’s Financial Markets,” a research report prepared for the Economic Council of Canada, the following was reported:
An important feature of the increasing significance of some aspects of financial activity is the greater use of financial markets and instruments that intermediate funds directly ? a process called “market intermediation,” which involves the issuance of, and trading in, securities such as bonds or stocks- as opposed to “financial intermediation,” in which the financial institution raises funds by issuing a claim on itself and provides funds in the form of loans.
a) Why is asset securitization an example of “market intermediation”?
b) Identify benefits that markets get from secularization?
c) In what ways can asset securitization reduce cost of funds for an issuer?
d) What forms of credit enhancements are available in a typical asset securitization process?
e) Why is it critical to evaluate the servicer before being picked in a securitization of loans such as mortgages?