The party selling the receivables or assets to the fund.
The entity that holds the receivables or assets backing the securities.
The party that owes the debt or loan repayment.
Source Institution
Receivable Transfer Amount
Transfer to the Fund
Asset Fund
Issue Amount
Principal and Interest Payment
Borrower
Originator
Asset-backed securities (ABS) is a type of financial investment that is collateralized by an underlying pool of assets that generate income or cash flows. ABSs appeal to income-oriented investors, as they pay a steady stream of interest, like bonds. 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 that aren’t available in any other investment.
Asset-backed securities (ABS) are created through a process called securitization. This involves pooling various income-generating assets—such as loans, leases, or receivables—into a single financial instrument, which is then sold to investors. The visual representation of this process, as shown in the chart, highlights the key entities and flow of transactions involved in ABS.
The procedure to invest in ABS starts with the investor filling out a request to purchase form and wire the amount. The ABSs get transferred to the investors' custody after confirmation and settlement.
