Structured finance is a sector of
finance that was created to help transfer
risk using complex legal and corporate entities. This transfer of risk, as applied to the
securitization of various financial assets (mortgages, credit card receivables, auto loans, etc.), has helped provide increased liquidity or funding sources to markets like housing and to transfer risk to buyers of
structured products; it also permits financial institutions to remove certain assets from their balance sheets as well as provides a means for investors to gain access to diversified asset classes. However, it arguably contributed to the degradation in underwriting standards for these financial assets, which helped give rise to both the inflationary credit bubble of the mid-2000s and the credit crash and
Financial crisis of 2007–08.