reason being is that trade receivables have maturities approximat- ing that of the commercial paper. Recently, the list of assets has expanded to include rated asset-backed, mortgage-backed, and corpo-     3Maureen R. Coen, Wanda Lee, and Bernard Maas, "ABCP Market Overview: ABCP Enters the New Millennium," Moodys Investors Service, 2000. 4"Understanding Asset-Backed Commercial Paper," Fitch, February 1, 1999.     rate debt securities as ABC paper issuers have attempted to take advan- tage of arbitrage opportunities in bond markets.5 The issuance of ABC paper may be desirable for one or more of the following reasons: (1) it offers lower-cost funding compared with tradi- tional bank loan or bond financing; (2) it is a mechanism by which assets such as loans can be removed from the balance sheet; and (3) it increases a borrowers funding options. According to Moodys, an investor in ABC paper is exposed to three major risks.6First, the investor is exposed to credit risk because some por- tion of the receivables being financed through the issue of ABC paper will default, resulting in losses. Obviously, there will always be defaults so the risk faced by investors is that the losses will be in excess of the credit enhancement. Second, liquidity risk which is the risk that collections on the receivables will not occur quickly enough to make principal and interest payments to investors. Finally, there is structural risk that involves the pos- sibility that the ABC paper conduit may become embroiled in a bankruptcy proceeding, which disrupts payments on maturing commercial paper.     5There are three types of securities arbitrage programs in existence at the time of this writing: limited purpose investment companies, market value ABC paper programs, and credit arbitrage ABC paper programs. For a discussion of this process, see Mary D. Dierdorff, "ABCP Market Overview: Spotlight on Changes in Program Credit En- hancement and Growth and Evolution of Securities Arbitrage Programs," Moodys Investors Service, 1999. 6Mark H. Adelson, "Asset-Backed Commercial Paper: Understanding the Risks," Moodys Investor Services, April 1993.     Legal Structure An ABC paper issue starts with one seller or multiple sellers portfolio of receivables generated by a number of obligors (e.g., credit card borrow- ers). A corporation using structured financing seeks a rating on the com- mercial paper it issues that is higher than its own corporate rating. This is accomplished by using the underlying loans or receivables as collateral for the commercial paper rather than the issuers general credit standing.