Asset-Backed Securities (ABS) are financial instruments created by pooling various types of assets, such as loans, credit card debt, or leases. These assets are then packaged together and sold to investors as securities. The cash flows generated from the underlying assets are used to pay interest and principal to the investors, making ABS an attractive investment option. Investors in ABS benefit from the diversification of risk, as the securities are backed by multiple assets rather than a single one. This means that even if some borrowers default, the overall performance of the ABS can remain stable, providing a steady income stream for investors.