Asset Backed Credit Default Swap - ABCDS


DEFINITION of 'Asset Backed Credit Default Swap - ABCDS'

A redit default swap wherein the reference asset is an asset-backed security rather than a corporate credit instrument. The buyer of an asset backed credit default swap (ABCDS) is buying protection for defaults on asset-backed securities or tranches of securities, rather than protecting against the default of a particular issuer.

BREAKING DOWN 'Asset Backed Credit Default Swap - ABCDS'

Asset-backed credit default swaps are structured differently from other credit default swaps due to the nature of the instrument being hedged. For example, since many asset-backed securities amortize and pay monthly, the credit default swap will more closely match these features. The most widely used ABCDS transactions cover U.S. subprime mortgage tranches of mortgage securitizations.

  1. Credit Default Swap - CDS

    A particular type of swap designed to transfer the credit exposure ...
  2. Collateralized Mortgage Obligation ...

    A type of mortgage-backed security in which principal repayments ...
  3. Contingent Credit Default Swap ...

    A variation on the credit default swap (CDS). In a simple CDS, ...
  4. Default

    1. The failure to promptly pay interest or principal when due. ...
  5. Recession

    A significant decline in activity across the economy, lasting ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
Related Articles
  1. Bonds & Fixed Income

    A Guide To Real Estate Derivatives

    These instruments provide exposure to the real estate market without having to buy and sell property.
  2. Bonds & Fixed Income

    Credit Default Swaps: An Introduction

    This derivative can help manage portfolio risk, but it isn't a simple vehicle.
  3. Options & Futures

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  4. Mutual Funds & ETFs

    Top 3 Latin America Stock Mutual Funds

    Discover information about some of the most popular mutual funds that offer investors exposure to equities of companies in Latin America.
  5. Investing Basics

    Diversify with These Four Alternative Assets

    In times of market volatility, investors add alternative assets to their portfolios--highly illiquid, but profitable investments like art, land or precious metals.
  6. Investing

    How To Build a Currency Hedged Strategy?

    We are still unsure of how to implement a currency hedge strategy based on the dollar's movement. So let’s focus on what’s easier to measure: time horizon.
  7. Economics

    The Effect of Fed Fund Rate Hikes on Gold

    Explore the historical relationship between interest rate increases and the price of gold, and consider what effect a fed funds rate hike might have on gold.
  8. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  9. Investing Basics

    3 Alternative Investments the Ultra-Rich Usually Own

    Learn about the ultra rich and what normally comprises their net worth; understand the top three alternative investments usually owned by the ultra rich.
  10. Mutual Funds & ETFs

    Top 3 Commodities Mutual Funds

    Get information about some of the most popular and best-performing mutual funds that are focused on commodity-related investments.
  1. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  2. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  3. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  4. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  5. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>
  6. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!