Asset-Backed Securities

Asset-backed securities are a type of hybrid bond known as a securitized bond. More specifically, they are debt obligations that represent claims on the cash flows from pools of loans.

What does that mean?

We have learned that a secured bond is a bond backed by an asset that acts as loan collateral. A mortgage bond, for example, is secured by property owned by the borrower. If the borrower defaults, the investor may seize the property and sell it to recover any accumulated losses.

So what does securitize mean? It means to make something secure that wasn’t before. A mortgage bond, for