Securities
Asset-backed securities and collateralized debt obligations are arrangements under which payments of interest and principal are backed by payments on specified assets or income streams.
Securitization may also be used as a term to describe this process.
Asset-backed securities may be issued by a specific holding unit or vehicle, which issues securities that are sold to raise funds to pay the originator for the underlying assets.
Asset-backed securities are classified as debt securities because the security issuers have a requirement to make payments, while the holders do not have a residual claim on the underlying assets; if they did, the instrument would be equity or investment funds shares.
Asset-backed securities are backed by various types of financial assets, for example, mortgages and credit card loans, non-financial assets, or by future income streams (such as the earnings of a musician or a government’s future revenue) that are not recognized in themselves as an economic asset in macroeconomic statistics.