Debt securities secured against specific assets.... more on: Asset backed securities
Securities collateralised by assets, not mortgages, such as car loans and credit card receivables.
Financial instruments collateralized by one or more types of assets including real property, mortgages, and receivables.
Is a security backed by notes or receivables against assets other than real estate. Some examples are autos, credit cards, and royalties.
Bonds that represent pools of loans of similar types, duration and interest rates. Almost any loan with regular repayments of principal and interest can be securitized, from auto loans and equipment leases to credit card receivables and mortgages.
Bonds or notes backed by loan paper or accounts receivable originated by banks, credit card companies, or other providers of credit and often "enhanced" by a bank letter of credit or by insurance coverage provided by an institution other than the issuer. Typically, the originator of the loan or accounts receivable paper sells it to a specially created trust, which repackages it as securities with a minimum denomination of $1000 and a term of five years or less. The securities are then underwritten by brokerage firms who re-offer them to the public. Because the institution that originated the underlying loans or receivables is neither the obligor nor the guarantor, investors should evaluate the quality of the original paper, the worth of the guarantor or insurer, and the extent of the protection.
An ABS is constructed by packaging together a group of securities and then issuing a new security whose purchaser has a claim against the cash flow generated by the original package. This process is known as securitisation.
