Synthetic structures: no longer a fantasy

The world of structured credit is evolving at a breakneck pace: instruments that were considered exotic a few years ago are now regarded as plain vanilla products. But investor demand has given rise to a new wave of structured credit products

The structured credit market in 2004 can be compared to the equity derivatives market in the mid-1990s. Structured credit products, especially synthetic CDOs, are becoming increasingly widespread among the global investor community. Why? They provide a very competitive risk/return profile in the current environment where the stock market remains uncertain, interest rates are low and the cash credit market seems to be largely overpriced.

For ‘traditional’ credit investors, these synthetic