Which type of securities are primarily traded based on their average life?

Asset-backed securities are primarily traded based on their average life because these securities are backed by a pool of underlying assets, such as loans or receivables, that generate cash flows. The average life refers to the expected time it will take for the cash flows to return principal to investors, making it a key consideration for valuation and trading.

Investors frequently assess the average life of asset-backed securities to understand the timing and risk associated with their cash flows. Since these securities can vary in terms of the underlying assets and the structure of the cash flows, this metric is crucial for determining yield and assessing interest rate risk. This differs from the other types of securities mentioned, which may have different valuation drivers primarily tied to credit risk, market conditions, or specific issuer characteristics rather than an average life calculation.