Leverage lift-off for new CDOs
After the correlation crisis left mezzanine collateralised debt obligations at the bottom of investors' wish-lists, structurers devised an innovative new CDO which offers leveraged exposure to super-senior risk. The product, known as an LSS CDO, has quickly become a favourite among investors. But are they aware of the risks? Laurence Neville reports
The synthetic collateralised debt obligation (CDO) market has shown itself to be both resilient and creative in the months following the correlation crisis of April and May. As mezzanine CDOs became increasingly less attractive following the repricing of the market, structurers went back to the drawing board and emerged with a number of new products. Chief among these in terms of volume of issuance and interest are leveraged super-senior CDOs.
Popular with a wide range of investors, leveraged
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