what is an asset backed security abs 
asset backed securities abs is a type of financial investment that is collateralized by an underlying pool of assets usually ones that generate a cash flow from debt such as loans leases credit card balances or receivables it takes the form of a bond or note paying income at a fixed rate for a set amount of time until maturity for income oriented investors asset backed securities can be an alternative to other debt instruments like corporate bonds or bond funds joules garcia investopediaunderstanding asset backed securities abss asset backed securities allow their issuers to raise cash which can be used for lending or other investment purposes the underlying assets of an abs are often illiquid and can t be sold on their own so pooling assets together and creating a financial instrument out of them a process called securitization allows the issuer to make illiquid assets marketable to investors it also allows them to get shakier assets off their books thus alleviating their credit risk 1the underlying assets of these pools may be home equity loans automobile loans credit card receivables student loans or other expected cash flows 12 abs issuers can be as creative as they desire for example asset backed securities have been built based on cash flows from movie revenues royalty payments aircraft landing slots toll roads and solar photovoltaics just about any cash producing vehicle or situation can be securitized into an abs for investors buying an abs affords the opportunity of a revenue stream the abs allows them to participate in a wide variety of income generating assets sometimes as noted above exotic ones that aren t available in any other investment 