asset-backed commercial paper (ABCP)

Asset-backed commercial paper (ABCP) is a short-term debt security issued by financial entities to raise funds. It is backed by pools of assets like loans, receivables, or other financial assets rather than solely by the issuer’s creditworthiness. Investors buy ABCP, providing liquidity to the issuer, which commits to pay back the amount with interest by a specified maturity date, typically within a few months. ABCP helps institutions manage short-term funding needs while offering investors a relatively safe, liquid investment backed by underlying assets.