A security whose income payments and hence value are derived from and collateralized (or “backed”) by a specified pool of underlying assets is known as
(2) An asset-backed security(ABS) is a security whose incomepayments and hence valueare derived from and collateralizedby a specified pool ofunderlying assets. The pool ofassets is typically a group ofsmall and illiquid assets whichare unable to be sold individually.Pooling the assets intofinancial instruments allowsthem to be sold to general investors,a process called securitization,and allows the riskof investing in the underlyingassets to be diversified.