What is the financial definition of "securitization"?

Securitization refers to the process of pooling various types of debt—such as mortgages, car loans, or credit card debt—into a single financial instrument that can be sold to investors. This transforms illiquid assets into more liquid securities, allowing the original lenders to receive immediate capital while distributing the risk associated with the debt among a wider group of investors. By pooling these debts together, the process enhances the ability to raise funds and diversifies the risk exposure to those investing in the resultant securities.

The other options represent different financial concepts. Issuing stock options pertains to incentivizing employees and does not involve the arrangement or pooling of debt. Creating a budget plan involves financial planning and allocation of resources rather than structuring financial instruments for sale. Acquiring assets to hedge risks focuses on risk management rather than the creation and sale of financial products formed from aggregated debt. Thus, the definition of securitization aligns closely with the process described in the correct option.