asset-backed security ( ABS)
A debt security collateralized by assets. Created from the securitization of any loans other than mortgage loans.
Securitized mortgage loans are called mortgage backed securities ( mortgage-backed security) or collateralized mortgage obligations.
Typically, asset backed securities area created from consumer installment or credit card loans. Securitized commercial (non-consumer) obligations are typically called collateralized debt obligations or CDOs. CDOs are sometimes defined to be a subset of ABSs. ABSs may be structured in a variety of ways including simple "pass through" structures and complex, "multi-tranche" structures. The value that ABSs provide to investors is comprised of the cash flows due to the ABS holders from the underlying loans. ABS issues are typically structured so that the bankruptcy or insolvency of an underlying borrower does not impact the cash flow received by the security owner.
See special purpose vehicle and waterfall. American Banker Glossary
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A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate. Bloomberg Financial Dictionary
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Financial and business terms. 2012.