Asset-backed securities can be characterized as securities secured by what?

Asset-backed securities (ABS) are financial instruments that are secured by a pool of assets, which typically include loans, credit card debts, leases, and sometimes other receivables. These underlying assets generate cash flow, which is then used to pay interest and principal to the investors in the ABS.

The inclusion of loans, credit card debts, and leases reflects the nature of these securities, as they are designed to convert illiquid assets into liquid securities that can be traded in financial markets. This allows investors to gain exposure to the cash flows generated by these assets without actually owning the underlying asset itself.

In contrast, securing these securities with physical assets, marketable securities, or exclusively with stocks and bonds does not align with the fundamental definition of asset-backed securities. While physical assets and various types of financial instruments can be involved in other forms of securities or collateralized products (like mortgage-backed securities), ABS specifically focuses on the cash flows from non-physical financial obligations, making the correct characterization of asset-backed securities C, as it encompasses multiple forms of debts and leases that generate consistent cash flow.