The major advantage of an asset backed security is that it reduces the risk because the pool of assets is now sold in fractions to a diversified pool of investors. The underlying asset in such securities is generally an illiquid asset ranging from a physical asset such as a property to financial assets such as mortgage loans, credit card loans etc.
The process of securitization is generally executed through a separate legal entity created or a special purpose vehicle (SPV) created specifically for this purpose.
Browse definitions and meaning of more concepts and terms similar to Asset Backed Securities. The Management Dictionary covers definitions and overview of over 7000 business concepts from 6 categories.