Types of Securities

The securities fall into two groups :

Asset Backed Securities (ABS)

The Investor rely on the performance of the assets that collateralizes the securities. They do not take an exposure either on the previous owner of the assets (the originator), or the entity issuing the securities (the SPV). Clearly, classifying securities as asset backed seeks to differentiate them from regular securities, which are the liabilities of the entity issuing them. An example of ABS is credit card receivables. Securitisation of credit card receivables is an innovation that has found wide acceptance. Although the average tenure of credit available to a credit card holder is generally very short, it is revolving by nature. The lacuna of short tenor of the receivables is, hence, overcome br substitution, whereby collections are used for fresh purchases of receivables. Thus, a secuntisable asset of marketable tenure comes into being. The structure in the case is generally Pay Through, since it is impossible to match the payment made by the card holder with the payment to the investor.

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