The study aims at analyzing the product and market functions of Asset-Backed Securities (ABS)
by firstly distinguishing characteristics of the product functions and market functions in
relation to Asset-Backed Securitization within a general compass. The product functions the
author refers to the phase prior to the issuing of securities namely the structuring phase.
Thus the author will be drawing from history and developments in the market players involved
in the structuring process and descriptions of the basic product functions. Secondly the
author will elaborate on the market functions the phase subsequent to the product being
implemented into the market. Furthermore the author strives to give the reader a clear
definition of the types of asset-backed securities and their functions within the market
framework. Thirdly the author will elaborate on the shortfalls in the ABS structure with
relation to it s risk and continue to discuss the risks attributable to the product and market
functions of ABS. Finally the author will submit solutions for the featured risks within the
framework and draw an outline as to the ABS securitization market in the future. Chapter 1:
distinguishes characteristics of the product functions of Asset Backed Securitization by
explaining the key definitions associated with initiating the product phase. Initially the
history and development of the ABS market will be unraveled thereafter the author continues to
describe the structure of the ABS process explained by describing the role played by the key
players in the process. Conclusively the author exemplifies the two main concepts of
securitization's product sphere namely True sale Conventional and Synthetic Securitization
Chapter 2: distinguishes characteristics of the Market functions of Asset Backed Securitization
by explaining the different types of ABS also by giving a short description of each type of
asset backed securities namely ABS MBS and CDO. Furthermore the author exemplifies the
development of the market for ABS. Conclusively the relevance of credit derivatives in the ABS
market is unraveled. The author included examples of the varied asset-backed products traded in
the market after comprehensively defining the functions of the product and market businesses.
In the final phase of the paper the author outlines the current financial crisis in relation
to ABS and endures to highlight the risks associated with asset backed structures from a
product and market perspective. The author continues to elaborate on his personal suggestions
for mitigating these risks and concludes with the future prospects of the ABS market after
taking into consideration the risks and proposed solutions.
