different structures, maturity profiles, credit enhancements, and other features of an asset-backed security before trading it." The "price" of an asset-backed security is usually quoted as a spread to a corresponding swap rate. For example, the price of a credit card-backed, AAA rated security with a two-year maturity by a benchmark issuer might be quoted at 5 basis points (or less) to the two-year swap rate." "Indeed, market participants sometimes view the highest-rated credit card and automobile securities as having default risk close to that of the highest-rated mortgage-backed securities, which are reportedly viewed as substitute for the default risk-free Treasury securities." Securitization Securitization is the process of creating asset-backed securities by transferring assets from the issuing company to a bankruptcy remote entity. Credit enhancement is an integral component of this process as it creates a security that has a higher rating than the issuing company, which allows the issuing company to monetize its assets while paying a lower rate of interest than would be possible via a secured bank loan or debt issuance by the issuing company. ABS indices On January 17, 2006, CDS Indexco and Markit launched ABX.HE, a synthetic asset-backed credit derivative index, with plans to extend the index to other underlying asset types other than home equity loans. ABS indices allow investors to gain broad exposure to the subprime market without holding the actual asset-backed securities. Advantages and disadvantages A significant advantage of asset-backed securities for loan originators (with associated disadvantages for investors) is that they bring together a pool of financial assets that otherwise could not easily be traded in their existing form. By pooling together a large portfolio of these illiquid assets they can be converted into instruments that may be offered and sold freely in the capital markets. The tranching of these securities into instruments with theoretically different risk/return profiles facilitates marketing of the bonds to investors with different risk appetites and investing time horizons. Asset backed securities provide originators with the following advantages, each of which directly adds to investor risk: Selling these financial assets to the pools reduces their risk-weighted assets and thereby frees up their capital, enabling them to originate still more loans. Asset-backed securities lower their risk. In a worst-case scenario where the pool of assets performs very badly, "the owner of ABS (which is either the issuer, or the guarantor, or the re-modeler, or the guarantor of the