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What does asset-backed security mean?

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asset-backed security
(ABS)
Noun

A marketable security that is issued by a special purpose vehicle (SPV) that buys financial receivables, such as automotive leases and consumer loans, that serve as collateral (backing) for and to generate the interest and principal payments to service the issued securities.

Synonym(s): 
  • plain-vanilla ABS.
Comment: 
An ABS is often used as an umbrella term for any type of securitized instrument, including mortgage-backed securities and collateralized debt obligations, but sometimes for only for ABSs backed by consumer assets, such as car loans, consumer loans and credit card receivables.
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