Asset-Backed Securities

Asset-backed securities, called ABS, are bonds or notes backed by financial assets. Typically these assets consist of receivables other than mortgage loans, such credit card receivables, auto loans, manufactured-housing contracts and home-equity loans. ABS differ from most other kinds of bonds in that their creditworthiness which is at the triple-A level for more than 90% of outstanding issues) derives from sources other than the paying ability of the originator of the underlying assets. Financial institutions that originate loans?including banks, credit card providers, auto finance companies and consumer finance companies?turn their loans marketable securities through a process known as securitization. The loan originators are commonly referred to as the issuers of ABS, but in fact they are the sponsors, not the direct issuers, of these securities. The article give details regarding benefits of investing in ABS, types of Assets That Back Securities, Interest Rates and Yields on ABS, Credit Quality and Credit Enhancement, How Are ABS Structured ,It overviews Prepayment Models, Asset-Backed Versus Other Fixed-Income Securities, Market Risks, Tax Status of ABS, Legal Investment Status, Minimum Investments and Transaction Costs and Marketability.

Provided by: The Bond Market Association Topic: Software Date Added: Jan 2003 Format: PDF

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