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 FTSE index follows declines for European peers, disappointed by the European Central Bank's latest press conference, information on the Asset Backed Security program and a defensive performance from the bank's president, Mario Draghi.
An asset backed security is one that derives its value and income payments from and collateralized by a specified pool of underlying assets, typically unable to be sold individually.
The Term Asset-Backed Securities Loan Facility (TALF) lends to investors against their AAA-rated asset backed security (ABS) collateral.