After an extended period of ample financial market liquidity and generally low credit spreads in many economies, the sharp loss in the value of subprime mortgages and related mortgage backed securities and the deterioration in investor appetite during the summer of 2007 led to broad and deep market distress. Because these and other innovative products had been created during the prior period of more benign market conditions, banks and securities firms had not observed how such products would behave during a significant market downturn and found their risk management practices tested to various degrees. Asset-backed securities (ABS1) in general and mortgage backed securities (MBS) in particular experienced the greatest degree of stress in 2007. The loss in the value of subprime mortgages throughout the year led to growing uncertainty about the valuations of credit instruments such as collateralized debt obligations (CDOs) that often included such subprime mortgages in what investors and rating agencies had previously considered high-quality assets. Consequently, investors sought clarity about the quality of specific assets supporting investment securities and shunned those whose risk they could not easily assess. Their willingness to purchase similar securitized assets backed by mortgages waned as they realized the difficulties of assessing the quality of the underlying assets, as did their willingness to purchase other complex credit products, such as collateralized loan obligations (CLOs). Consequently, many types of credit instruments, such as MBS and other ABS, CDOs, CLOs, and asset-backed commercial paper (ABCP), became illiquid during this time, causing steep decreases in many secondary market prices and requiring corresponding markdowns in the valuations of firms’ holdings of affected assets.