An asset-backed securitization with a waterfall structure is most likely using Credit tranching (subordination).
- Financial securities known as asset-backed securities (ABSs) are those that are backed by income-producing assets like credit card receivables, home equity loans, student loans, and auto loans.
- A business creates an ABS when it sells its loans or other debts to an issuer, a financial organization that then bundles the debts into a portfolio and sells it to investors.
- The process of pooling assets into an ABS is known as securitization.
- ABSs are popular with income-seeking investors because, like bonds, they provide a consistent stream of interest.
- ABS can include collateralized debt obligations and mortgage-backed securities.
- The IMF makes credit available to a member country in "credit tranches" as long as those financial reforms are carried out in accordance with IMF recommendations.
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