Asset-backed securities have been out of favor for years. However, these securities are well suited for risk-return optimization of portfolios in the environment of increasing interest rate.
This article provides you with five questions and answers about asset-backed securities. Yes, those securities that were partly responsible for the credit market meltdown and sparked the latest financial crisis in 2008.
What are asset-backed securities?
Asset-backed securities are bonds whose income payments and value are derived from a pool of other assets. Common examples of these underlying assets are mortgages and credit card debt. Investors can invest in various levels of risk through different tranches of asset-backed securities. Every tranche has a specific exposure to credit, interest and prepayment risk.
Read the full article (in Dutch) here.