What are Asset-Backed Securities?

An Asset-Backed Security, or ABS, are bonds or notes backed by financial assets. It is an example of “securitization.”

The assets within the ABS generally tend to consist of different kinds of debt receivables, such as credit cards, auto loans, home equity loans, and so forth.

Banks build portfolios of receivables in making loans and issuing credit, and then in many cases package these loans together and sell them to investors (known as “securitization”).

What are Asset Classes?
What are Mortgage-Backed Securities?