What is ABS business?

ABS, or Asset-Backed Securities, are financial instruments that are backed by a pool of assets such as loans, leases, or receivables. These assets are typically bundled together and sold to investors as securities. The cash flows from the underlying assets are used to make payments to the investors in the form of interest and principal. ABS are a popular form of financing for companies and financial institutions, as they provide a way to raise capital by monetizing a portfolio of assets. These assets can include a wide range of financial products such as auto loans, credit card receivables, and mortgage loans. ABS provide several benefits for both issuers and investors. For issuers, ABS offer a way to transfer the risk of the underlying assets to investors, which can help free up capital and reduce balance sheet risk. For investors, ABS provide a way to gain exposure to a diversified pool of assets and can offer attractive yields compared to other fixed income investments. There are different types of ABS, including mortgage-backed securities (MBS), collateralized debt obligations (CDOs), and collateralized loan obligations (CLOs), each with their own unique characteristics and risk profiles. Overall, ABS play an important role in the global financial markets by providing a means for companies and financial institutions to access capital and for investors to gain exposure to a wide range of assets.