Asset-backed bond

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Asset-backed bond.

Asset-backed bonds, also known as asset-backed securities, are secured by loans or by money owed to a company for merchandise or services purchased on credit.

For example, an asset-backed bond is created when a securities firm bundles debt, such as credit card or car loans, and sells investors the right to receive the payments made on those loans.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
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