<commit_before>---
layout:		property
title:		"underlying_type"
schemas:	[security]
---

# underlying_type
An asset-backed security (ABS) is a security whose income payments and hence value are derived from and collateralized (or "backed") by a specified pool of underlying assets. The pool of assets is typically a group of small and illiquid assets which are unable to be sold individually. Pooling the assets into financial instruments allows them to be sold to general investors, a process called securitization, and allows the risk of investing in the underlying assets to be diversified because each security will represent a fraction of the total value of the diverse pool of underlying assets. **The pools of underlying assets can include common payments from credit cards, auto loans, and mortgage loans, to esoteric cash flows from aircraft leases, royalty payments and movie revenues.**

Source: https://en.wikipedia.org/wiki/Asset-backed_security

**COMMISSION REGULATION (EC) No 809/2004 of 29 April 2004 [implementing Directive 2003/71/EC of the European Parliament][epreg] and of the Council as regards information contained in prospectuses as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements:**

*‘asset backed securities’ means securities which:*

> (a) represent an interest in assets, including any rights intended to assure servicing, or the receipt or timeliness of receipts by holders of assets of amounts payable there under;

or

> (b) are secured by assets and the terms of which provide for payments which relate to payments or reasonable projections of payments calculated by reference to identified or identifiable assets;

[epreg]: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02004R0809-20130828<commit_msg>Update underlying_type.md<commit_after>---
layout:		property
title:		"underlying_type"
schemas:	[security]
---

# underlying_type
An asset-backed security (ABS) is a security whose income payments and hence value are derived from and collateralised (or "backed") by a specified pool of underlying assets. The pool of assets is typically a group of small and illiquid assets which are unable to be sold individually. Pooling the assets into financial instruments allows them to be sold to general investors, a process called securitisation. This allows the risk of investing in the underlying assets to be diversified because each security will represent a fraction of the total value of the diverse pool of underlying assets. The pools of underlying assets can include common payments from credit cards, auto loans, and mortgage loans, to esoteric cash flows from aircraft leases, royalty payments and movie revenues.
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