Asset-Class valuation. An aircraft is an asset, it is also an asset-backed securities (ABS), in finance pools of familiar alternative asset class types, such as auto loans, credit card receivables, mortgages, and business loans. These contractual obligations often rank senior to a borrower’s traditional debt obligations. The goal is to reduce the ABS investors’ exposure to the borrower’s financial health, in this case, the aircraft lessors. ABS also has many other investor-friendly features that may help protect against loss and improve liquidity, such as: 1. tranching of risk, 2. overcollateralization, and 3. diversity of payers in each underlying financial pool. The principal job of ABS investors is to analyze the cash flows from bond obligations to assess value and the possibility of loss. Aircraft investment decisions cross asset classes and require multiple approaches to analyzing and comparing them to other alternative assets. An example would be airline equity yield. It can be used because the ratio measures returns on an investment's equity portion. It is the ratio of earnings to the equity invested. Corporate & municipal bonds.a. ABS and other forms of structured credit continue to offer higher yields than similarly rated corporate or municipal bonds. Certainty & Uncertainty.1. US Treasuries offer certainty. Another way to look at the decision is to think in terms of “certainty” and “uncertainty” with respect to price. Except for a default by the US government, US Treasuries are perceived as having a high level of price certainty because they offer: a. a fixed income stream, b. without risk of capital loss, if held to maturity. Equities offer uncertainty. 2. Equities. In contrast, equities suffer from price uncertainty bercause: a. they do not provide fixed cash flows and; b. future prices are unknown. 3. 3. Investment grade credits. Investment grade credits fall between treasuries and equities because: 1. they have an income stream, 2. coupled with default risk.