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Securitization refers to the process of converting illiquid assets, such as mortgages, loans, and receivables, into more liquid tradable securities. This is accomplished by pooling these assets together and selling them to a special purpose vehicle (SPV), which then issues securities backed by these assets. The resulting securities can be divided into different tranches based on risk and return, allowing investors with varying risk appetites to participate in the market. Securitization plays a crucial role in debt financing, as it enables companies and financial institutions to access larger sums of capital at lower costs than traditional bank loans. It also helps to diversify credit risk and improve overall market efficiency by providing greater liquidity for both borrowers and investors.