ABS Asset-backed Security
ABS Asset-backed Security | Definition
Asset-backed Security. A financial instrument constructed by packaging a group of securities and then issuing a security whose purchaser has a claim against the cash flows generated by the original package. This process is known as securitization. Most asset-backed securities contain additional, complex features that give them option-like characteristics. The prepayment feature of a home mortgage is a good example.
Originally designed for the mortgage market, asset-backed securities have also been constructed with packages of receivables, especially credit card receivables. In the mortgage area, the major types of ABS include mortgage pass-through securities and collateralized mortgage obligations.
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