In finance, an asset-backed security is a type of debt security that is based on assets or collateralized by the cash flows from a specified pool of underlying assets. Assets are pooled to make otherwise minor and uneconomical investments worthwhile, while reducing risk by diversifying the underlying assets. Securitization makes these assets available for investment to a broader set of investors. In some cases it can be used as credit enhancement by creating a security that has a higher rating than the issuing company which monetizes its assets. This allows it to pay a lower rate of interest than would be possible via a secured bank loan or debt issuance.
Asset Backed Security
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