What financial process involves pooling various financial assets and selling them as securities?

Securitization is the process of pooling various financial assets, such as loans, mortgages, or receivables, and transforming them into securities that can be sold to investors. This process allows financial institutions to convert illiquid assets into liquid securities, facilitating improved cash flow and risk management. By bundling these assets, the issuer can create asset-backed securities, which are then structured to appeal to investors with varying risk appetites.

This process is significant in that it can enhance market liquidity and provide a mechanism for diversifying risk, as the pooled assets are typically backed by cash flows generated from the underlying assets. Moreover, securitization can improve the availability of credit in the economy by allowing lenders to obtain funding by selling off their receivables.

In contrast, aggregation refers to the collection of data or assets but does not specifically imply the transformation into tradable securities. Capitalization usually relates to the total value of a company through its equity and debt, and syndication typically involves a group of investors or financial institutions collaborating to fund a project or loan, rather than restructuring assets into securities.