ABS / Asset backed security

A generic term designating a security issued by an intermediate entity (SPV) between a transferor and investors in the context of a securitization operation. This security is a bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. . When the assets backing these securities (called underlying assets) are made up of mortgage Mortgage A loan made against property collateral. There are two sorts of mortgages:
1) the most common form where the property that the loan is used to purchase is used as the collateral;
2) a broader use of property to guarantee any loan: it is sufficient that the borrower possesses and engages the property as collateral.
loans like subprime loans, they are called Mortgage Backed Securities MBS
Mortgage Backed Securities
See ABS.
(MBS). MBS are subdivided into Residential Mortgage Backed Securities (RMBS), backed by mortgage loans made to private individuals and Commercial Mortgage Backed Securities CMBS
Commercial Mortgage Backed Securities
CMBS / Commercial Mortgage Backed Securities
(CMBS). The term Collateralized Debt Obligations CDO
Collateralized Debt Obligations
The term CDO covers multiple means of structuring paper products for financial assets. These include bonds, loans and sometimes non-listed shares. Such derivatives enable banks to render normally non liquid debts liquid, thus increasing the tradability of the asset. From the buyer’s point of view, CDO are also supposed to reduce risk by diluting it, since there is less chance of default on a bouquet of credits than on one single credit. In reality, the absence of clear information about the composition of CDO and the fact that they are often combined with high risk assets make them a very risky product.
(CDOs) is used when the underlying assets are bonds issued by companies or banks, and Collateralized Loan Obligations (CLOs) when these assets are bank loans.

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