This course discusses the benefits of securitization, describes securitization, and explains the investment characteristics of different types of Asset Backed Securities (ABS). The terminology regarding ABS varies by jurisdiction. A mortgage-backed security (MBS) is an ABS backed by a pool of mortgages, and a distinction is sometimes made between MBS and ABS backed by non-mortgage assets. This distinction is common in the United States, for example, where typically the term “mortgage-backed securities” refers to securities backed by high-quality real estate mortgages and the term “asset-backed securities” refers to securities backed by other types of assets. Because the US ABS market is the largest in the world, much of the discussion and many examples in this reading refer to the United States.
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