Asset-Backed Commercial Paper


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Asset-Backed Commercial Paper

A short-term debt security issued by a corporation that is collateralized by some asset. In general, asset-backed commercial paper is secured by accounts receivables or something similar. It carries less risk than other commercial paper, which is unsecured. It is a highly liquid investment and forms part of the money market.
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By placing itself in the position of being the primary financier of the credit risk embedded in the pool of assets funded by the asset-backed commercial paper program in terms of value the sponsor takes the position of being the primary risk bearer and thus the "primary beneficiary".
Like other securitization programs, asset-backed commercial paper programs segregate assets into pools and transform these pools into market instruments.