asset-backed security

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Asset-backed security

Asset-Backed Security

A debt security collateralized by some receivables on some credit sale. Common examples of this collateral include receivables on credit cards, automotive loans, and similar assets. Returns on these securities come from customers' payments on their credit cards and other loans that may be backing the securities. Banks and companies package and sell their receivables to investors in order to reduce the risk of loan defaults. See also: Mortgage-backed security.

asset-backed security

A debt security collateralized by specific assets. Although the term applies to any debt backed by identified assets, it generally refers to securities backed by short-term collateral such as credit-card receivables, car loans, and home-equity loans. Because even the most financially strapped companies can hold valuable assets, it is possible for the credit quality of asset-backed securities to be substantially better than the general credit of the company issuing the securities.
References in periodicals archive ?
The HFRI Fixed-Income Asset Backed Index gained +1.40 per cent, while the HFRI RVA: Multi-Strategy Index gained +0.50 per cent for April; both of these were positive influenced by falling yields and the continued strong environment for corporate and asset backed bonds; although the HFRI Convertible Arbitrage Index declined -0.89 per cent for the same period.
CUNA Mutual's historical and expected investment losses are driven primarily by exposure to structured securities, mainly residential mortgage backed and asset backed bonds, which remain under pressure due to the economy, according to Fitch.