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 ?
Moreover, investors may be susceptible to concentrations of risks across various asset-backed security issues through overexposure to an organization performing several roles in the securitization process or as a result of geographic concentrations within the pool of assets providing the cash flows for an individual issue.
This risk retention may occur directly as a result of recourse provisions or, indirectly, as a result of retaining a subordinated class of an asset-backed security or by some other means.
The risk weights assigned to an asset-backed security depend on the issuer and whether the assets that constitute the collateral pool are mortgage related, for example, residential mortgages or pass-through securities.