Problems tranching the existing ABX and CMBX indices has led asset-backed pros to pitch the idea of combing the names in the two indices. The ABX and CMBX have too few underlying names and ratings differences to tranche right now, although tranching--which would allow for asset-backed correlation trading--is the holy grail of the synthetic indices. So traders are debating the merits of combining similarly-rated names from each index into joint tranches. An advantage is that there would be more names and more variety, but the situation is not straight forward as the two sectors also have different assumptions and maturities. "It will be challenging and we're not there yet," said one trader. "But we're looking at everything."
ABX, CMBX Combined Tranching Mooted
