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There are no derivatives here. Jefferies was going to sell bonds backed by the loans. The payments on the loans would effectively flow directly to the bondholders.

A derivative (e.g. a CDS) would be more like a side bet between two (possibly unrelated) parties based on the performance of those bonds.

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This is actually a pretty typical example of a derivative. You can buy these bonds to get exposure to the loans without having to worry about managing them directly.

A CDS would be a derivative on a derivative. It would allow you to get exposure to these bonds without worrying about being long or short a particular issue.

By that logic, S&P 500 ETFs would be 'derivatives' too.

(They're not.)

https://en.wikipedia.org/wiki/Asset-backed_security

I guess it depends on your definition. It would seem that, from a layman's perspective, ETFs and ABSs are both derivatives. If we look at GGP's comment

> Buy up crap, package and obfuscate it, then sell it off as "high quality" crap to investors desperate for yield.

Derivatives generally introduce leverage on a tracked asset. Leverage isn't a feature of securitized loans.

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