What Is an Example of an Asset-Backed Security?

Asset-based security is something like a collateralized debt obligation (CDO) (ABS). It’s similar to a loan or bond in that it’s backed by a collection of financial instruments, such as bank loans, mortgages, credit card receivables, airplane leases, smaller bonds, and occasionally even other ABSs or CDOs. This portfolio serves as collateral for the CDO’s interest, which is collected by institutional investors.