Explore commonly used personal finance terms.
An Asset-Backed Security (ABS) is a financial instrument created by pooling together assets, such as loans, leases, or credit card debt, that generate cash flow. The cash flow from these assets is used to pay investors in the ABS. This type of investment offers a way for investors to gain exposure to various types of debt, potentially diversifying their portfolios. The risk and return on an ABS depend on the quality of the underlying assets, which can range from mortgages to auto loans. ABS investments are structured to distribute payments over time.
