20 Examples of Asset-Backed Securities
Asset-backed securities (ABS) are financial securities backed by a specific pool of underlying assets. These assets often include loans, leases, credit card debt, royalties, or receivables. This comprehensive guide will delve into 20 examples of asset-backed securities, helping to provide a deeper understanding of these complex financial instruments. We’ll also tackle some common questions about asset-backed securities in our “people also ask” section.
Understanding Asset-Backed Securities
Asset-backed securities are created through a process known as securitization. During this process, the originating entity assembles a pool of financial assets, which is then sold to a special purpose vehicle (SPV). The SPV repackages this pool into interest-bearing securities and sells them to investors.
Examples of Asset-Backed Securities
Here are 20 examples of asset-backed securities:
1. Residential Mortgage-Backed Securities (RMBS)
RMBS are securities collateralized by residential mortgages. These mortgages are typically pooled together according to certain criteria. For more details, visit RMBS.
2. Commercial Mortgage-Backed Securities (CMBS)
CMBS are backed by mortgages on commercial properties rather than residential properties. More about CMBS.
3. Collateralized Mortgage Obligations (CMO)
CMOs are a type of mortgage-backed security that creates separate pools of pass-through rates for different types of mortgage investors. Read more on CMO.
4. Collateralized Debt Obligations (CDO)
CDOs are structured financial products that pool together cash flow-generating assets and repackages this asset pool into discrete tranches that can be sold to investors. Details on CDO.
5. Collateralized Loan Obligations (CLO)
CLOs are similar to collateralized debt obligations (CDOs) but specifically pool together leveraged loans. More on CLO.
6. Credit Card Receivables-Backed Securities
These are ABS backed by the cash flows coming from a pool of credit card debts.
7. Auto Loan Asset-Backed Securities
These ABS are backed by the payment streams from auto loans.
8. Student Loan Asset-Backed Securities (SLABS)
SLABS are securities backed by the payments from various types of student loans. More about SLABS.
9. Covered Bonds
Covered bonds are backed by cash flows from mortgages or public sector loans. They are similar in many ways to asset-backed securities issued in securitization transactions. More about Covered Bonds.
10. Home Equity Loan ABS
These ABS are backed by the payments from home equity loans.
11. Aircraft Lease ABS
Aircraft lease ABS are securities backed by payments from aircraft leases.
12. Equipment Lease ABS
Equipment lease ABS are securities backed by payments from equipment leases.
13. Small Business Loan ABS
Small business loan ABS are backed by the payments from small business loans.
14. Insurance Premium Finance ABS
Insurance premium finance ABS are securities backed by the payments of insurance premiums.
15. Mutual Fund Fee ABS
These ABS are backed by the revenues that mutual funds receive from their management fees.
16. Stranded Cost Utility ABS
Stranded cost utility ABS are securities backed by payments from utility payments.
17. Manufactured Housing Contract ABS
These ABS are backed by the payment streams from mobile home contracts.
18. Franchise Loan ABS
Franchise loan ABS are securities backed by payments from franchise loans.
19. Music Royalties ABS
Music royalties ABS are securities backed by the royalty payments made by music consumers and users.
20. Timeshare Loan ABS
Timeshare loan ABS are securities backed by payments from timeshare loans.
People Also Ask
How Safe are Asset-Backed Securities?
The safety of asset-backed securities primarily depends on the quality and performance of the underlying assets. The risk is also associated with the creditworthiness of the issuing entity. It’s crucial to do thorough research and consider seeking advice from financial advisors before investing.
What is the Difference Between Asset-Backed Securities and Mortgage-Backed Securities?
Mortgage-backed securities (MBS) are a type of asset-backed security specifically collateralized by a set of mortgages. Asset-backed securities, on the other hand, can be backed by various types of financial assets.
Who Buys Asset-Backed Securities?
Asset-backed securities are typically bought by institutional investors, such as pension funds, insurance companies, and hedge funds. Some ABS, however, may be suitable for individual investors as well.
Conclusion
Asset-backed securities offer a way to invest in a diversified pool of financial assets, which can potentially offer higher returns than other types of investments. As with any investment, it’s crucial to do thorough research and understand the potential risks associated with investing in these types of securities.
See also: 10 Examples of Mortgage-Backed Securities
