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Securitization, the pooling of illiquid loans or assets into marketable securities, has left a significant mark on financial markets and transformed the way in which banks, insurance companies, pension funds, and other financial institutions manage their balance sheets. The first mortgage-backed security (MBS) was privately issued in 1968 and was created by pooling thousands of individual residential mortgage loans. Over the past 50 years, the template for securitizing assets has been used to create multiclass securities from portfolios of credit card receivables, auto loans, corporate bonds, home equity loans, subprime mortgage loans, leveraged loans, commercial mortgage loans, municipal bonds, and emerging market debt, among others. The securities created from these assets go by various names, including collateralized mortgage obligations (CMOs), asset-backed securities (ABSs), collateralized bond ...

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