Liquidity, defined as the ease with which an asset may be marketed, has a self-fulfilling dimension. If investors in the primary market for a new asset fear an illiquid secondary market, the issuance does not take off thereby vindicating the initial concern about an illiquid secondary market....

The structure of securitization deals, referred to as ¶tranching¶, is standard.  In those transactions, claims on cash flows generated by the collateral are split into several classes of notes, at least 3 and possibly more than 5. Each class is called a tranche and has absolute priority in...