with the yield curve of the broader market. Short-term money market securities may be better modeled by a separate model for the bill curve, and other markets may use the swap curve rather than the treasury curve. Credit attribution The situation is complicated by recent innovations in the credit markets and explosive growth of instruments that allow credit risk to be precisely targeted, such as credit-default swaps and the ability to split different tranches of instruments in collateralized debt obligations (CDO). The simplest way to regard return on credit is to see it as return made by changes in a security's yield, after changes due to movements in the market's reference curve have been removed. This may be quite adequate for a simple portfolio, but for traders who are deliberately interest-rate neutral and are making all their returns from credit bets, something more detailed is probably necessary. An alternative way to regard the higher yields of credit instruments is to regard them as being priced off different yield curves, where these credit curves lie above the reference curve. The lower the credit rating, the higher the spread, thus reflecting the extra yield premium demanded for greater risk. Using this model we can describe returns of, say, an A-rated security in terms of movements in the AAA curve, plus movements (tightening or widening) in the credit spread. Other ways to look at the return generated by credit spreads is to measure the yield of each security against an industry sector curve, or (in the case of Eurobonds) to measure the spread between bonds of the same credit rating and currency but differing by country of issue. Attribution on mortgage-backed securities Mortgage-backed securities (MBS) are substantially more complex to price than vanilla bonds, due to the uncertainties implied by the prepayment option included in the instrument's structure. Ideally, the returns generated by these other risks should be shown in the attribution report. Simple risk measures The simplest measure of interest-rate sensitivity for an MBS is its effective duration. The modified duration of a bond assumes that cash flows do not change in response to movements in the term structure, which is not the case for an MBS. For instance, when rates fall, the rate of prepayments will probably rise and the duration of the MBS will also fall, which is entirely the opposite behavior to a vanilla bond. For this reason, effective