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 ?
issued an equipment lease transaction in the public market, creating the first asset-backed security, according to the Dean Witter Asset-Backed Securities Reference Guide.
The introduction of these features, while increasing the complexity of asset-backed structures, has enhanced their marketability to different types of investors by appealing to their differing investment objectives and risk preferences.
Asset Securitization: A Supervisory Perspective In recent years the number of banks and bank holding companies (referred to here as banking organizations) that have issued securities backed by their assets and that have acquired asset-backed securities as investments has increased markedly.